Pinterest stock gained more than 20% in Wednesday trading, after the social media company reported first-quarter earnings and sales that exceeded expectations. Similar to Snapchat parent company Snap, Pinterest recorded a big acceleration in its revenue growth for the quarter.
San Francisco-based Pinterest said Tuesday that it earned an adjusted 20 cents per share on sales of $740 million for the March-ended quarter. On average, analysts projected the company would post adjusted earnings of 13 cents per share on sales of $700 million, according to FactSet.
Sales grew 23% year over year for the quarter, while earnings increased 150% on a per-share basis.
For the current quarter, Pinterest guided for sales between $835 million and $850 million. That easily would surpass the $827 million in sales for the June-ending quarter that analysts were previously projecting, according to FactSet.
On the stock market today, Pinterest stock gained more than 20% to close at 40.46. Shares jumped decisively ahead of Pinterest's 21-day and 50-day moving averages, according to MarketSurge.
Pinterest's Sales Accelerate
Pinterest's 23% sales growth for the March quarter is a big jump from the 12% year-over-year sales growth for the firm in the fourth quarter of 2023.
In a news release, Pinterest Chief Executive Bill Ready said the quarter represented Pinterest's fastest revenue growth since 2021.
"We're executing with tremendous clarity and focus, shipping new products and experiences that users want, and in doing so, we're finding our best product market fit in years," Ready added.
Last week, Snap published first quarter results that showed a similar acceleration in revenue. The results could help answer at least some of the concerns from investors about smaller digital advertising players being able to keep pace with Facebook parent company Meta Platforms.
To help compete with Meta, Pinterest has partnered with two other tech giants: Amazon and Alphabet. Last year, Pinterest struck a partnership to run third-party ads from Amazon on its platform in the U.S. It announced a similar deal with Google during its February earnings call. Google's Ad Manager will serve advertisements to Pinterest users in international markets.
Ready told analysts Tuesday that the Amazon partnership is "live on all our main surfaces" in the U.S. while the Google partnership is "progressing nicely."
The firm is also focused on so-called direct response ads that drive users to product pages or other interactions, rather than ads focused on increasing brand awareness.
App Users Are 'Aging Down'
For Pinterest, global monthly active users increased 12% year over year to 518 million as of March 31. On the analysts call, Ready highlighted something he said is unusual for consumer apps: Pinterest is "aging down."
"We're continuing to win with Gen Z," Ready said. "They are more than 40% of the users on the platform and our largest and fastest-growing demographic."
Analysts took notice of that stat as well. "To us, aging down should have positive implications on user (lifetime value)," wrote Piper Sandler analyst Thomas Champion in a client note Tuesday.
Piper Sandler maintained Pinterest as its "Top SMID-cap (small and mid-size market capitalization) idea." The analysts reiterated a buy rating and set a price target of 50 for Pinterest stock, up from 48 prior to the report.
Pinterest Stock: Technical Ratings
With Wednesday's jump, Pinterest stock has swung to an over 10% gain year to date. Further, shares have gained 76% over the past 12 months.
Coming into the report, Pinterest shares had an IBD Composite Rating of 92 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings in one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Pinterest's IBD Relative Strength Rating was 79 out of 99.
