PINS: Pinterest has chosen a new CEO
Visual discovery engine company Pinterest, Inc. (PINS) allows users to discover and personalize visual content. It allows users to find inspiration for their life, including recipes, style, home inspiration, DIY and others; and provides video, product, and idea Pins.
Shares of PINS surged last week after the announcement that longtime CEO Ben Silbermann was leaving. hand over the reins to Bill Ready, Head of Commerce at Google. Investors are waiting a deeper push into e-commerce by this transition. Silbermann will retain his seat on the board of directors as executive chairman.
“In our next chapter, we’re focused on helping Pinners buy, try, and implement all the great ideas they see. Bill is a great leader for this transition. He’s a builder who understands business deeply. and payments,” Silbermann said.
The company previously announced plans to prioritize e-commerce outside of its ad-based business model. Additionally, last month, PINS announced the finalization of its acquisition of THE YESan AI-powered fashion shopping platform that allows users to shop a personalized feed based on active user input on brand, style, and size.
The company expects this acquisition to accelerate its vision of being the home of taste-driven shopping.
Bill Ready was previously responsible for Google’s commerce operations and previously served as executive vice president and chief operating officer of PayPal. He brings his expertise in fintech and e-commerce, which should strengthen the capacities of PINS.
PINS shares are down 75.4% over the past year and 45.7% year-to-date to close the last trading session at $19.73.
Here is what could shape the performance of PINS in the short term:
Macro headwinds hamper growth
For the first fiscal quarter (ended March 31, 2022), PINS revenue increased 18.5% year-over-year to $574.89 million. However, its non-GAAP net income was $68.99 million, down 12.1% year-over-year, and its non-GAAP EPS was $0.10. , down 9.1% year-on-year. Also, its adjusted EBITDA decreased 8.4% from the prior year quarter to $76.80 million.
The company struggled to reduce the number of monthly active users as pandemic-induced popularity began to wane as people increasingly engaged in outdoor activities. Global monthly active users of PINS decreased 9% from the prior year period to 433 million. The company attributed the drop to the growth of the pandemic in the 2021 quarter and lower search traffic due to Google’s algorithm change late last year.
In addition, PINS stated that its revenue growth was offset by macroeconomic headwinds, including supply chain issues and other factors, which have impacted its CPG advertisers and some mid-market advertisers. “In Europe, Russia’s invasion of Ukraine has exacerbated a difficult macroeconomic environment, impacting many of our advertisers in this region,” the company said.
Expectation below baseline
Analysts expect PINS revenue to grow 10% year-over-year to $674.50 million in the second fiscal quarter (ending June 2022). Additionally, its revenue is expected to grow 14.9% in the current quarter ending September 2022 and 15.7% in the fiscal year ending December 2022.
However, the consensus EPS estimate of $0.89 for the current year indicates a decline of 21.1% year-over-year. Additionally, its EPS is expected to decline 26% in the quarter (ended June 2022) and 33.3% in the current quarter.
Impressive profit margins
PINS’ gross profit margin of 79.69% is 57.1% higher than the industry average of 50.74%. Additionally, its net profit margin of 12.48% is 155.1% higher than the industry average of 4.89%.
PINS’s ROE, ROA and ROTC of 12.26%, 9.35% and 8.55% compare to industry averages of 5.39%, 2.29% and 3.51%, respectively.
POWR ratings reflect uncertain outlook
PINS has an overall rating of C, translating to Neutral in our own POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
The title has a rating of C for Value, consistent with its mixed valuation. In terms of forward P/E, PINS is trading at 63.23x, 253.6% higher than the industry average of 17.88x. However, its non-GAAP forward PEG of 0.41x is 68.9% below the industry average of 1.32x.
PINS has a D rating for Sentiment. The dismal EPS growth estimates for the next few quarters justify this rating.
Of the 65 shares of the Internet industry, PINS is ranked #13.
Beyond what I said above, you can also check PINS ratings for Quality, Growth, Momentum, and Stability. here.
See the highest rated stocks in the internet industry here.
Conclusion
Although the company should benefit from the management change, Colin Sebastian of Baird said, “short-term trends are likely to remain volatile.”
On the other hand, Rosenblatt Securities analyst Barton Crockett thinks Ready’s lack of experience growing social media audiences might be PINS’ biggest challenge right now. .
So it might be wise to wait and see how the CEO change helps improve PINS’s growth trajectory in a challenging macro environment before investing in the stock.
How does Pinterest, Inc. (PINS) compare to its peers?
Although PINS has an overall POWR rating of C, you might want to consider taking a look at industry peers Yelp Inc. (YAP), which has an A rating (Strong Buy), and trivago NV (TRVG) and Travelzoo (TZOO), which have a B (buy) rating.
Shares of PINS rose $0.22 (+1.12%) in premarket trading on Thursday. Year-to-date, PINS is down -45.72%, compared to a -18.71% rise in the benchmark S&P 500 over the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a master’s degree in economics, she gained knowledge in equity research and portfolio management at Finlatics. After…