Pinterest (NYSE: PINS) just reported its Q1 earnings results. With a bright future ahead and it beating analysts’ estimates for earnings per share (EPS) and revenue, I’ll be looking to add to my position in Pinterest while its share price stagnates at IPO levels.
Pinning money
Pinterest posted revenue of $575m, up 18% year on year (Y/Y). Non-GAAP EPS also managed to beat estimates as it came in at $0.10. This was 8 cents higher than Wall Street’s expectations. The firm’s net loss was a 76% decrease to -$5.3m this year, a significant step closer to profitability. This was down to the increase in average revenue per user (ARPU), which saw a 28% jump (Y/Y).
The company also saw its cash and equivalents increase to $1.7bn, and liabilities decrease to $459m. This leaves it with room for investment in order to grow its user base and average revenue per user (ARPU).
Pinterest-ing developments
Speaking of the user base, Pinterest did see a decline in monthly active users (MAU). The New York Stock Exchange-listed business saw its MAUs decline by 9% on an annual basis. However, management suggested that the downtrend in MAUs could be bottoming. Nonetheless, the figure saw a 0.5% increase from the previous quarter. CFO Todd Morganfield also expects MAU headwinds to dissipate from Q3 onwards.
To give this figure more context, Pinterest highlighted in its letter to shareholders that mobile users, which make up the bulk of its traffic and revenue, saw mid-single-digit growth in the most recent quarter. This is great news as Pinterest continues to gain more quality than quantity.
Moreover, CEO Ben Silbermann cited plenty of innovations for the platform. One of them is the development of a new API for stakeholders and advertisers. This should bring additional value, which could result in higher advertising revenue. Additionally, it has begun beta testing ‘Your Shop’. Its partnership with Woocommerce has also seen shopping engagement grow, as seamless checkout continues to roll out to more users, according to management on the earnings call.
The monetisation of video Idea Pins, which saw a 15 times increase in engagement, makes me excited too. This is evident in its R&D spending that was up 13% quarter on quarter, with management mentioning its intention to spend more on innovating its offerings throughout 2022.
Pinned down supply chain
All that being said, Pinterest does face a couple of challenges in the near term. Although guidance for revenue in Q2 is for 11% annual growth, macroeconomic factors cannot be ruled out. Q2 is statistically a weak quarter for Pinterest as users venture outdoors. Nonetheless, the removal of sign-up barriers to use the platform should bring more engagement.
However, I will be paying attention to the upcoming US GDP and retail numbers, as they may have an effect on future revenue. After all, supply chain issues have already caused a decline in advertising spend by consumer packaged goods firms. With the effects of China’s lockdowns on global supply chains still to be felt, Q2 could see weaker numbers. Nevertheless, I remain bullish on the long-term prospects of Pinterest and will be buying more shares for my portfolio.