Social media company Pinterest (NYSE:PINS) reported fourth-quarter earnings last Friday. And after beating Wall Street expectations for revenue, adjusted earnings per share, monthly active user (MAU) growth and average revenue per user (ARPU), Pinterest stock skyrocketed. After closing at $23.01 on Thursday, PINS shot as high as $27.25 — up 18.4% — before settling down to close at $25.20, for a 9.5% gain on the day.
After a frustrating 2019 for PINS investors that saw Pinterest slide from an August high of $36.83 to close the year at just over half that value at $18.64, Friday was a shot of much-needed good news.
The question is, can Pinterest keep rolling in 2020?
Pinterest Posts Impressive Q4 Numbers
When it comes to a social media company, it’s all about the eyeballs. Investors want to see growth in the number of users, and the monetization of those users. That said, Pinterest posted Q4 numbers showing that growth is there. Globally, MAUs were up 26% year-over-year in Q4, while ARPU rose 15% compared to the previous year.
The increase in users and engagement resulted in significant global revenue growth, as well. The $400 million posted for Q4 is up 46% YoY. With that, Pinterest highlighted its international achievements, which were key to its ongoing success after it surpassed Snap’s (NYSE:SNAP) Snapchat as the third largest social media platform in the U.S. in 2019. Overall in Q4, Pinterest’s international MAU growth was 35% YoY, international ARPU improved 122%, and international revenue was up 202%.
Furthermore, adjusted earnings for the quarter were $77 million, or 12 cents per share. That beat the expected 8 cents per share.
The company also released guidance for 2020. In there, the full-year global revenue projection for the company is $1.52 billion. This figure is a big change in comparison to $1.14 billion in 2019 and $755 million in 2018.
Overall, the market liked what it saw and Pinterest stock saw a big boost as a result.
Is Pinterest Back on Track?
Shortly before the company’s April 2019 IPO, Aswath Damodaran, a professor of corporate finance and valuation at New York University’s Stern School of Business had this to say about Pinterest:
“You don’t want to go up against Facebook and Google. Create a niche and be in it. The mistake that Snap made, which Pinterest should not, is they thought they could be bigger than Facebook.”
In many ways, Pinterest did just that. Doing so helped it to escape the data privacy issues that plagued Facebook (NASDAQ:FB) and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) in 2019. Pinterest also posted MAU numbers through the year that showed platform growth, instead of the relatively flat numbers the social media giants reported. However, concerns about monetization of international users hurt PINS — especially through the fall.
Bottom Line on Pinterest Stock
Impressive Q4 numbers helped boost the outlook for PINS among many investment analysts, but there is still caution about the outlook for 2020. Among a handful of analysts, PINS is a consensus hold. However, the median 12-month price target of $30 represents 22% upside.
One of the dissenters is Bernstein, pointing out that despite the impressive 202% growth rate for the quarter, international sales contributed only $50 million to Pinterest’s quarterly revenue of $400 million. Bernstein analysts don’t see international sales taking off in the short term, and continue to view that as a point of concern:
“Monetization will continue to be a slow burn from an absolute dollar perspective given the requirement to scale sales on the ground.”
In addition, the investment firm sees ongoing challenges with advertisers and how they track the effectiveness of their spending on social media platforms. As a result, Bernstein has PINS rated as a “market perform,” with a price target of $24.
Time will tell who is right. But for the moment, with Pinterest stock now up about 32% in 2020, the market seems sure the company is on the right track.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.