Shares of Pinterest (PINS) have been strong performers lately, with the stock up 12.4% over the past month. The stock hit a new 52-week high of $35.36 in the previous session. Pinterest has gained 43.8% since the start of the year compared to the 48% move for the Zacks Computer and Technology sector and the 60.4% return for the Zacks Internet - Software industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 30, 2023, Pinterest reported EPS of $0.28 versus consensus estimate of $0.21 while it beat the consensus revenue estimate by 2.67%.
For the current fiscal year, Pinterest is expected to post earnings of $1.07 per share on $3.06 billion in revenues. This represents a 72.58% change in EPS on a 9.09% change in revenues. For the next fiscal year, the company is expected to earn $1.28 per share on $3.58 billion in revenues. This represents a year-over-year change of 19.42% and 17.17%, respectively.
Pinterest may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Pinterest has a Value Score of D. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 32.6X current fiscal year EPS estimates, which is not in-line with the peer industry average of 37.8X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 18.1X. Additionally, the stock has a PEG ratio of 0.91. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Pinterest currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Pinterest fits the bill. Thus, it seems as though Pinterest shares could have a bit more room to run in the near term.
How Does PINS Stack Up to the Competition?
Shares of PINS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Five9, Inc. (FIVN). FIVN has a Zacks Rank of # 2 (Buy) and a Value Score of D, a Growth Score of A, and a Momentum Score of C.
Earnings were strong last quarter. Five9, Inc. beat our consensus estimate by 20.93%, and for the current fiscal year, FIVN is expected to post earnings of $2.18 per share on revenue of $909.09 million.
Shares of Five9, Inc. have gained 27% over the past month, and currently trade at a forward P/E of 41.77X and a P/CF of 166.97X.
The Internet - Software industry is in the top 12% of all the industries we have in our universe, so it looks like there are some nice tailwinds for PINS and FIVN, even beyond their own solid fundamental situation.
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