Why Pinterest (NYSE:PINS) Stock Rose After Earnings -- The Business in Lift Off Mode
Lede
Pinterest (NYSE:PINS) announced earnings on 2-6-2020 after the market closed and the stock rose abruptly after hours on the results.
Story
The bearish calls came out just one quarter ago ascribing shrinking user growth and near meaningless ARPU from international users to a wound up bearish thesis. It turns out, at least for Q4 2019 and guidance for full year 2020, that thesis was incorrect.
On February 5th, 2020, we wrote Pinterest (PINS) Twitter Account Validates Business Gains Ahead of Earnings.
In that article we gained circumstantial evidence that the 4th quarter (yet to be reported at the time) was in fact strong. On February 6th, we got the empirical data.
1. Monthly active users (MAUs) must grow:
MAU was up 8% in the U.S. and 35% internationally for a total of 335 million MAU translating into 26% year over year growth vs analyst estimates of 331.3 million MAU making it now larger than the last time Twitter reported MAUs.
This was a beat
2. Average revenue per user (ARPU) must also grow:
ARPU was up 26% in the U.S. to $4.00 and up 122% internationally to $0.21 for a total of $1.22 vs analyst estimates of $1.14.
This was a beat
3. Revenue: $400 million, up 46% year-over-year, versus analyst expectations of $367.4 million.
This was a beat
Total revenue for 2019 was $1.14 billion, an increase of 51% year-over-year compared to 2018. Revenue growth was driven by an increase in advertising demand from new advertisers and to a lesser extent existing advertiser.
Here is an image of revenue growth from the company:
Adjusted EPS: $0.12 versus analyst expectations of $0.08.
This was a beat
The company delivered 48% year-over-year adjusted EBITDA growth. Here is an image:
* Full Year Revenue Guidance: $1.52 billion versus analyst expectations of $1.50 billion.
This was a beat
* Monthly Active Users (MAUs): Now reaching 335 million versus analyst expectations of 331.3 million.
This was a beat
Here is an image from the company:
* Average revenue per user (ARPU): $1.22 versus expectations of vs $1.14.
This was a beat
ARPU rose 26% in the United States and 122% internationally. Here is an image from the company:
Here is the full thread from Twitter that I posted @ophirgottlieb.
$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
But, but, but... ARPU (average revenue per user) is too low:
ARPU was up 26% in the U.S. to $4.00 and up 122% internationally to $0.21 for a total of $1.22 vs analyst estimates of $1.14.
2/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
MAU was up 8% in the U.S. and 35% internationally for a total of 335 million MAU translating into 26% year over year growth vs analyst estimates of 331.3 million MAU making it now larger than the last time $TWTR reported MAUs.
3/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
Adjusted EPS came in at $0.12, versus analyst expectations of $0.08.
4/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
Further the company delivered 48% year-over-year adjusted EBITDA growth going from $52 million to $77 million.
5/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
Revenue: $400 million, up 46% year-over-year, versus analyst expectations of $367.4 million.
6/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
Total revenue for 2019 was $1.14 billion, an increase of 51% year-over-year compared to 2018. Revenue growth was driven by an increase in advertising demand from new advertisers and to a lesser extent existing advertisers.
7/n $PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
This mix reflects higher growth from international markets and advertisers.
Revenue from conversion optimization and video ad products contributed to growth.
8/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
Revenue by year pic.twitter.com/bKDj5nPKOJ
9/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
Also note that international revenue went from 5.4% of total revenue last year to now over 10.2%. The globalization of Pinterest is happening with hyper growth in those regions.
10/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
Note that International markets yield far lower average revenue per user (ARPU), but Pinterest continues to demonstrate that it can and will grow that number, showing 185% international revenue growth year-over-year.
11/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
MAU through time (now larger than $TWTR) pic.twitter.com/uEvxeNdDZh
12/n$PINS
— Ophir Gottlieb (@OphirGottlieb) February 6, 2020
Since this business is cyclical, we need to look at Q4 to Q4 for a proper comparison. When we do that we see that U.S. ARPU grew 26% year-over-year, from $3.18 to $4.00.
Conclusion
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Thanks for reading, friends.
The author is long stock and call spreads in Pinterest at the time of this writing.
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