Pinterest (PINS) After The Bell: Focus On User & ARPU Growth

Earnings season is on its last leg with 75% of companies having reported by the end of this week. The excitement isn’t over yet though. Recent IPO, Pinterest PINS is releasing its 2nd quarter results after the bell today. Analysts are estimating an EPS of -$0.09 and revenues of $235 million.

PINS has been trading all over the board since it went public back in April. The initial hype had shares up 80% above the offering price after a week and a half of trading. The firm missed big on earnings in Q1 setting in reality for investors and plummeting the stock 23%. Since then PINS has recovered over 21%.

The Business

Pinterest is a niche social media platform that can be described as an idea board where people can share things such as recipes or home décor idea. It’s a fast-growing business with an accelerating topline that hasn’t fallen below 50% year-over-year growth.

The key driver of the business is a combination of monthly active user (MAU) expansion and average revenue per user (ARPU) appreciation. MAUs have been growing at a rate of over 20% for the last 5 quarters, with international advancement driving the majority of that growth. Pinterest's investor relations team provides the graphics below.

ARPU appreciation is going to be crucial in Pinterest’s journey to profitability. International users makeup over 70% of the firms total MAUs but only account for 7.4% of its topline. Pinterest was only able to bring in 8 cents per internationally user compared to the $2.25 ARPU it achieved domestically in the first quarter. The ability to further monetize international users is going to be vital for the future of Pinterest.

Social media earnings have been mixed. Facebook FB had a negative price impact from their report due to a user growth slowdown. Twitter TWTR, on the other hand, was able beat user growth expectations and illustrated a further ability to monetize its user base. TWTR has climbed over 13% since the release.

Take Away

Pinterest is still early on in its growth phase, but the business may turn a profit as soon as next year. There is much uncertainty in stocks like PINS because the share price is a reflection of future profitability. The ability to turn a profit isn’t a guarantee but as more quarterly earnings are reported the uncertainty wanes.

In PINS earnings report this evening look at user growth and the company’s ability to further monetize its international users. As always, pay close attention to management guidance and sentiment for clues on perceived insider outlook.


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