In short

  • Pinterest managed to grow its sales by 78% year-on-year as its international Average Revenue Per User (ARPU) grew by 91% year-on-year and international Monthly Active Users (MAU) grew by 37% year-on-year
  • However, the company noted that engagement was fading as a result of easing COVID restrictions

Numbers

  • First quarter revenue grew 78% year-on-year to $ 485m, better than expectations of $ 473m
  • Global Monthly Active Users grew 30% year-on-year-year to 478m
  • The company recorded a net loss of $ 22m for the first quarter

What Pinterest Is Saying

  • “Starting in mid-March, the easing of pandemic restrictions slowed US MAU growth and lowered engagement year over year as people spent less time online”
  • “In Q1, we saw good retention of the MAUs we gained during 2020, but we still don’t know if or how long this retention will last. Our understanding of future engagement levels is similarly limited.”

The Price

  • At a price to sales ratio of a little under 30 before earnings, Pinterest has to reassure investors on MAU growth and engagement
  • For comparison, Facebook is trading at a price to sales ratio of 10 while scoring EBIT margins of 45% and still managing to grow by around 25% year-on-year

The Take

  • Pinterest is a fast-growing company that managed to take advantage of the pandemic and saw its sales increase dramatically
  • However, a large share of Pinterest’s stock price growth was driven by expanding multiples
  • The company might have a hard time delivering on its still lofty valuation as consumers return to their pre-pandemic lives and decrease time spent online

Our Position

  • We had no position in Pinterest and we stay on the sidelines for now

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Disclosures

The author has no business relationship with any company mentioned in this article and the author is not receiving any form of compensation for this article other than contributions from paying subscribers.

Credits

Photo by Szabo Viktor on Unsplash.