Social commerce platform Pinterest (NYSE: PINS) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 17.7% year on year to $898.4 million. On the other hand, the company expects next quarter’s revenue to be around $1.14 billion, slightly below analysts’ estimates. Its non-GAAP profit of $0.40 per share was 16.1% above analysts’ consensus estimates.
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Pinterest (PINS) Q3 CY2024 Highlights:
- Revenue: $898.4 million vs analyst estimates of $896.4 million (in line)
- Adjusted EPS: $0.40 vs analyst estimates of $0.34 (16.1% beat)
- EBITDA: $242.1 million vs analyst estimates of $223.1 million (8.5% beat)
- Revenue Guidance for Q4 CY2024 is $1.14 billion at the midpoint, slightly below analyst estimates of $1.14 billion
- Gross Margin (GAAP): 79.1%, up from 77.6% in the same quarter last year
- Operating Margin: -0.7%, in line with the same quarter last year
- EBITDA Margin: 27%, up from 24.2% in the same quarter last year
- Free Cash Flow Margin: 27.2%, up from 11.9% in the previous quarter
- Monthly Active Users: 537 million, up 55 million year on year (beat)
- Market Capitalization: $23.17 billion
"We delivered another strong quarter with users reaching another all-time high of 537 million and revenue growth at 18%,” said Bill Ready, CEO of Pinterest.
Company Overview
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
Social Networking
Businesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Luckily, Pinterest’s sales grew at a decent 12.5% compounded annual growth rate over the last three years. This is a useful starting point for our analysis.
This quarter, Pinterest’s year-on-year revenue growth was 17.7%, and its $898.4 million of revenue was in line with Wall Street’s estimates. Management is currently guiding for a 15.7% year-on-year increase next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 16.1% over the next 12 months, an acceleration versus the last three years. This projection is commendable and illustrates the market thinks its newer products and services will catalyze higher growth rates.
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Monthly Active Users
User Growth
As a social network, Pinterest generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.
Over the last two years, Pinterest’s monthly active users, a key performance metric for the company, increased by 9.1% annually to 537 million in the latest quarter. This growth rate is solid for a consumer internet business and indicates people are excited about its offerings. 
In Q3, Pinterest added 55 million monthly active users, leading to 11.4% year-on-year growth. The quarterly print was higher than its two-year result, suggesting its new initiatives are accelerating user growth.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Pinterest because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Pinterest’s audience and its ad-targeting capabilities.
Pinterest’s ARPU growth has been mediocre over the last two years, averaging 3.6%. This isn’t great, but the increase in monthly active users is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Pinterest tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether users can continue growing at the current pace. 
This quarter, Pinterest’s ARPU clocked in at $1.70. It grew 5.6% year on year, slower than its user growth.
Key Takeaways from Pinterest’s Q3 Results
We liked that despite in line revenue, Pinterest beat analysts’ adjusted EPS expectations this quarter. We were also glad it expanded its number of users, and this Global MAU metric also exceeded expectations. On the other hand, its revenue guidance for next quarter missed analysts’ expectations and its revenue growth slowed. It seems that the market is focusing on the guidance miss, and the stock traded down 10.7% to $30.29 immediately following the results.
Is Pinterest an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.