Down 14% on Earnings, Should You Buy the Dip in This…

Down 14% on Earnings, Should You Buy the Dip in This Growth Stock?

Pinterest Inc. (PINS) is a social media platform that encourages users to post images, videos, and GIFs. The platform allows users, creators, publishers, and businesses to save visual recommendations while discovering information on topics they love such as food recipes, motivation, home, inspiration, and more in the form of pinboards.

Founded in 2008, it was initially known as Cold Brew Labs but later changed its name to Pinterest in April 2012. Headquartered in San Francisco, the company's market cap stands at $20.1 billion.

PINS stock fell hard after earnings on Nov. 8, cratering 14% in a single session as investors responded to the news. The stock is now down 23.7% on a YTD basis, considerably lagging the broader equities market.

Pinterest Slides Despite Solid Results

Pinterest posted its third-quarter results after the close on Nov. 7, reporting a profit of $30.6 million, or $0.40 per share, topping analysts' estimated $0.34 per share. Revenue for the quarter reached $898.4 million, surpassing the consensus forecast of $897.1 million. The social media platform gained 55 million users year over year.

The company had an EBITDA of $242.1 million, easily beating analyst’s $223.1 million estimates, while the EBITDA margin came to 27%, managing a 2.8% rise YoY. Pinterest's gross margin for the quarter stood at 79.1%, which was an increase from 77.6% reported in the same quarter last year. PINS ended the quarter with a cash reserve of $1.03 billion, down 24.26% YoY from $1.36 billion reported last year.

“We delivered another strong quarter with users reaching another all-time high of 537 million and revenue growth at 18%. Our AI investments are driving results by powering better personalized experiences and greater performance for advertisers, with our lower-funnel ad tools being the fastest-growing part of our business,” said Pinterest CEO Bill Ready.

Despite the solid results, investors zeroed in on Pinterest’s ad pricing, which was down 17% YoY. Pinterest generates its revenue from advertisements, and a decline in this metric sparked the stock's post-earnings sell-off. While record active users helped drive PINS to a strong quarter, softer pricing can cause major headaches in the months to come.

Management also released their guidance for the current quarter, which calls for revenue of $1.13 billion to $1.15 billion, indicating yearly growth of 16.20%. Non-GAAP operating expenses are expected in the range of $495 million to $510 million, an 11-14% growth rate.

Analysts Defend PINS After Earnings

Analysts are very optimistic about the stock, as seen by the change in its consensus rating from “Moderate Buy” last month to a “Strong Buy” rating now. With 32 analysts in coverage, 22 of them call PINS a “Strong Buy.”

Following the post-earnings pullback, Wedbush analyst Scott Devitt upgraded the social media stock from “Neutral” to “Outperform,” and setting a price target of $38.

In a note, Devitt suggested that investors “take advantage of this period of relative weakness,” and added that the sell-off is "overdone with shares now trading for ~11.6x its 2026E adj. EBITDA estimate for a business that is set to grow adj. EBITDA at a ~27% CAGR over the next three years."

The average price target for PINS is $41.05, indicating expected upside potential of more than 45% from Friday's close.

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On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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