Wall Street analysts stick with Pinterest despite rough first earnings report

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Ben Silbermann, co-founder and chief executive officer of Pinterest Inc.

Tomohiro Ohsumi | Bloomberg | Getty Images

Wall Street analysts are sticking with Pinterest despite its rocky first earnings report.

The social media platform on Thursday afternoon posted a much bigger loss than many expected.

Most analysts feel the social media company, which went public last month, is on the right track and recommended that clients use the pullback as an opportunity to buy the shares.

“The stock could remain volatile near term, but management laid out a compelling roadmap that should ensure ongoing strong revenue growth and a route to attractive profitability over the medium term,” Atlantic Equities analyst James Cordwell said.

Shares plunged 14.1% in trading Friday, opening at $25.87 a share. That is still above the stock’s $19 IPO price but near its closing price on its first day of trading of $24.40.

The negative earnings headlines were mostly, “noise,” according to Baird analysts.

“Overall, fundamentals are intact, and we view significant near-term weakness as an attractive buying opportunity,” Baird analyst Colin Sebastian said.

Analysts at UBS said Pinterest is in a “unique position” in its space, and they reiterated their confidence in the company’s ability to execute over the long haul.

“While its initial earnings report & forward commentary were roughly inline with Street estimates, we still see signs that PINS long-term narrative is solidly intact,” UBS analyst Eric Sheridan wrote in his recap note to clients.

One analyst admitted the earnings report wasn’t great but wasn’t backing down from his buy rating.

“Though the headline outlook may have missed the mark, we believe expectations have been broadly reset for the rest of the year and our view on the long-term drivers of the business remain intact (and actually pulled in a bit),” Nomura analyst Mark Kelley said.

Here are what the major analysts are saying about Pinterest earnings:

Baird- Outperform rating

“While some media headlines suggest a revenue and/or earnings “miss,” we view this largely as noise given a few high-end estimates skewing consensus, and more importantly, the company’s ongoing strength in U.S. advertising growth and early signs of traction from international growth efforts. Overall, fundamentals are intact, and we view significant near-term weakness as an attractive buying opportunity.”

J.P. Morgan- Neutral rating

“Overall, we believe Pinterest’s 1Q results were solid, but shares traded down ~15% in the after-market on the 2019 guide coming in lighter than some had expected. However, the guide for revs of $1.055B-$1.080B & EBITDA of ($70M)-($45M) was above our estimates, & our 2019/2020 revs increase 2% while our EBITDA losses also improve. We continue to believe that Pinterest’s early-stage international & self-serve offerings provide meaningful growth drivers over time, but they require strong, sustained execution & PINS cannot simply flip a switch on either one. We maintain our Neutral rating & $32 PT based on ~14.5x our 2020E revenue of $1.43B.”

Nomura Instinet- Buy rating

“Though the headline outlook may have missed the mark, we believe expectations have been broadly reset for the rest of the year and our view on the long-term drivers of the business remain intact (and actually pulled in a bit). Our estimates change only slightly, and we remain confident in our longer term thesis that Pinterest will be a much larger company over time as MAUs continue to ramp and the monetization gap continues to close. Reiterating our Buy and $34 target.”

Credit Suisse- Neutral rating

“International MAUs and ARPU fell short of our expectations. As we have previously noted, the company is just starting to ramp its International sales effort as it exports the products it has already built for the US – and the opportunity to close the ~$0.75 per user loss accordingly still remains on the table. We also expect Pinterest to expand the number of advertisers it currently has on board as it expands its relevance to new content verticals. As such our long-term thesis remains unchanged – our target price remains at $28 and we maintain our Neutral rating based primarily on valuation.”

Atlantic Equities- Overweight rating

“The stock could remain volatile nearterm, but management laid out a compelling roadmap that should ensure ongoing strong revenue growth and a route to attractive profitability over the medium term. We therefore remain O’weight and would recommend taking advantage of the pullback in the stock.”

RBC- Sector perform

“Per our recent initiation report, we view Pinterest as very well positioned as a hybrid between Search and Social and as a visual productivity tool for Discovery. We believe the company addresses a large market opportunity, is a leading player with scale, provides a strong value proposition to both consumers and advertisers, has an arguably clear path to profitability, and will benefit from several LT growth drivers. Our investment concerns primarily relate to competition, an uncertain ability to expand into more verticals, and to valuation – with PINS currently trading at an intrinsically high 10X EV/Sales on 2020E.”

Deutsche Bank- Hold rating

“Pinterest reported solid results in its first quarter as a public company, landing ahead of the flash results provided in SEC filings and guiding such that our revenue and EBITDA estimates move higher. The company continues to improve the consumer and advertising product and lay the groundwork for international monetization to ramp in 2020. The pullback after-hours likely reflects less firepower potential for revenue until 2020, on top of a rich valuation. We continue to believe a significant monetization ramp is ahead of Pinterest, and we increase out TP $1 to $26, but we maintain our Hold rating as the positive outlook is largely priced into shares in our view.”

UBS- Neutral rating

“While its initial earnings report & forward commentary were roughly inline with Street estimates, we still see signs that PINS long-term narrative is solidly intact. In our view, Pinterest (as a media/commerce platform through which users build personal experiences) sits in a unique position to capitalize on a mix of the secular tailwinds of the offline to online advertising shift & as the lines between traditional worlds of digital advertising and eCommerce continue to blur. In our recent initiation (link), we framed PINS within three pivotal questions & came to the conclusion that revenue performance should meet/exceed long-term expectations, margins will ramp to profit in the coming years & upside optionality remains around visual search & social commerce. We reiterate our Neutral rating and $31 PT as we see a balanced risk/reward from recent trading levels.”

Goldman Sachs- Neutral rating

“While we believe PINS’ scaled user base and data assets will allow the company to close the monetization gap with peers over time, ultimately driving profitability in the business, with PINS continuing to trade at a growth-relative premium to peers (after hours), we remain Neutral rated with a $25, 12-month price target.”

Susquehanna- Neutral rating

“1Q was broadly in-line with the preannounced range, but 2019 guide missed expectations and will likely lead to downward estimate revisions. It appears that PINS is taking a conservative stance toward key areas like self-serve and international monetization. While we continue to like the valuable core user base, social commerce niche, and potential monetization opportunity, we believe valuation is fair given the healthy premium to SNAP and would like to see more traction with international expansion and monetization.”

Barclays- Equal weight rating

“PINS reported revenue and EBITDA that were broadly in-line with the S-1 flash range for 1Q and guided slightly above our estimates for FY19. The tone of the call was upbeat and management provided some key milestones in its first shareholder letter. Stepping back, we aren’t surprised to see shares down 15%+ on an in-liner in after hours trading, we were similarly not surprised to see PINS run up to 14x revenue ahead of the print (both standard-pattern for mobile advertising IPO debuts). From here, we expect shares to trade sideways to down for a bit until the valuation is compelling enough compared to its peers, or somewhere in the low $20s, where we would become more constructive.”



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