3 Key Metrics Investors Will Be Watching When Pinterest Reports Earnings

Pinterest (NYSE: PINS) is experiencing rapid growth in user engagement and is bringing on newcomers at a blistering pace. The coronavirus pandemic has led people to spend more time at home, and apps from Pinterest to Facebook are seeing increasing usage.

And judging from the results of its competitor Snap, Pinterest may have a positive surprise in store for shareholders when the company reports third-quarter results on Oct. 28. Here are three important numbers to keep an eye on when that report comes out.

A woman looking at the Pinterest app using an iPad.

Pinterest looks to continue rapid user growth. Image source: Pinterest.

Pinterest is adding users, increasing revenue, and decreasing losses

First and foremost, investors will be watching Pinterest's global monthly active users (MAUs). In the most recent quarter, that figure increased to 416 million, which was 39% higher than the previous year. In contrast, Facebook grew monthly active users at a 12% rate. And in a slightly different measure, Snapchat reported increasing daily active users by 18% year over year. Those results sent parent company Snap's stock soaring. If Pinterest continues its blistering pace of member growth, that's a great sign for long-term shareholders. That's because marketers will want to spend more with Pinterest, for access to hundreds of millions of potential customers.

Secondly, shareholders will be interested in revenue growth. In the most recent quarter, revenue growth decelerated to 4%. CFO Todd Morgenfeld gave some insight into why advertisers were pulling back spending at the height of the pandemic, saying, "Advertising was not useful when stores were closed or it wasn't effective if they were sold out and couldn't deliver on the demand." The shifts in consumer behavior resulting from business closures created a uniquely poor market environment for advertisers.

The situation appears to be turning around for the better, as the company reported revenue in July increased by 50% from the prior year and the company is projecting that it will report revenue growth of 30% in the current quarter. Businesses globally continue to reopen and they are needing to get the word out that they are open for commerce. Moreover, as enterprises are able to increase supply, they need to reach potential customers to generate demand for their products and services.

Finally, those interested in Pinterest will be looking at its net losses to improve. The company reported a net loss of $100.7 million in the most recent quarter. Since the company is forecasting robust revenue growth in the current quarter, it will not be surprising if it comes closer to profitability. It would be yet another positive sign for long-term investors if it continues to grow at such a rapid rate.

What this means for investors

Analysts on Wall Street are expecting the company to report revenue of $377.68 million and earnings per share of $0.02. Shares of this fast-growing tech stock are already up more than 160% year to date. The company continues to benefit from brands leaving Facebook because of brand-safety concerns and marketers starting to spend as businesses reopen.

Its rival Snap posted explosive results when it reported on Oct. 20, beating expectations, and its stock price is up more than 50% since it reported. If that is any indicator of what's in store for Pinterest, then investors who are not yet shareholders will do well by placing it on their watch list.

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