Pinterest (PINS) erases bulk of after-hours losses after positive earnings call, analysts raise numbers

Shares of Pinterest Inc (NYSE: PINS) are trading modestly in the red in pre-open Tuesday despite the company reporting weaker-than-expected revenue for its fourth quarter, in addition to the soft guidance.

PINS reported EPS of $0.29 on revenue of $877 million, which compares to the consensus for earnings of $0.27 on revenue of $888M. Monthly active users (MAUs) came in at 450 million, somewhere in line with the consensus. Europe delivered higher-than-expected MAUs while North America and the Rest of the World missed estimates. The average revenue per user (ARPU) was $1.96, below Street’s $1.98.

Pinterest shares initially tumbled 13% following the release of the Q4 earnings report, however, shares rotated back higher after the management indicated on the earnings call that it is expecting to see higher margins in 2023, hinting at cost-cutting actions. Shares are down less than 3% in pre-market Tuesday.

The company also announced a plan to buy back $500M of its shares over 12 months. Moreover, it was announced that CFO Todd Morgenfeld will leave on July 1, 2023.

CEO Bill Ready said the company is “staying focused on growing monetization per user, integrating shopping throughout the core user experience, and increasingly driving operational rigor. While the industry as a whole is facing headwinds, we are adapting quickly to a changing macro environment and are committed to creating a more positive online experience for our users and advertisers.”

On the guidance front, Pinterest added:

“Our current expectation is that Q1 2023 revenue will grow low single digits on a year-over-year percentage basis, which takes into account slightly lower foreign exchange headwinds than Q4 2022.”

Bernstein analyst Mark Shmulik hiked the price target to $27 per share from the prior $25 on the Market Perform-rated PINS stock.

“We accept management's POV that we should see margins expand throughout 2023 as revenue leverage emerges and marketing and headcount-related costs come off the books,” Shmulik wrote in a client note.

Wolfe Research analyst Deepak Matihvanan also hiked the price target as he went to $33 from the prior $30. He rates PINS stock as Outperform.

“PINS is making steady progress on key LT initiatives (shopping, video, full funnel objectives). Macro uncertainties remain an overhang on entire digital ads complex but PINS's top-line growth is showing relative out-performance. As we look ahead, we see potential for acceleration through FY23 as key initiatives scale further,” the analyst said.

By Senad Karaahmetovic

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