Social commerce platform Pinterest (NYSE: PINS) announced better-than-expected results in Q2 FY2023, with revenue up 6.32% year on year to $708 million. Pinterest made a GAAP loss of $34.9 million, improving from its loss of $43.1 million in the same quarter last year.
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Pinterest (PINS) Q2 FY2023 Highlights:
- Revenue: $708 million vs analyst estimates of $695.7 million (1.78% beat)
- EPS (non-GAAP): $0.21 vs analyst estimates of $0.12 ($0.09 beat)
- Free Cash Flow of $61.9 million, down 65.9% from the previous quarter
- Gross Margin (GAAP): 76.2%, up from 75.2% in the same quarter last year
- Global Monthly Active Users: 465 million, up 32 million year on year
“In Q2, we continued to build momentum with consumers and advertisers while further accelerating our pace of innovation,” said Bill Ready, CEO of Pinterest.
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
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
Pinterest's revenue growth over the last three years has been very strong, averaging 37.6% annually. This quarter, Pinterest reported mediocre 6.32% year-on-year revenue growth, roughly in line with what analysts were expecting.
Ahead of the earnings results, analysts covering the company were projecting sales to grow 10.7% over the next 12 months.
While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
Usage 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.
Pinterest has been struggling to grow its monthly active users, a key performance metric for the company. Over the last two years, its users have declined 0.09% annually to 465 million. This is one of the lowest rates of growth in the consumer internet sector.
Luckily, Pinterest added 32 million monthly active users in Q2, leading to 7.39% year-on-year growth.
Key Takeaways from Pinterest's Q2 Results
Sporting a market capitalization of $19.8 billion, more than $2.3 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Pinterest is attractively positioned to invest in growth.
It was comforting to see that Pinterest topped analysts' revenue expectations this quarter, even if just narrowly, partly driven by a beat on global MAUs. That really stood out as a positive in these results. On the other hand, revenue growth was sluggish. Guidance for next quarter calls for high single-digit revenue growth year-on-year and low double-digit expense growth year on year. This means that the Q3 outlook for revenue and adjusted EBITDA are relatively in line. Overall, the results could have been better. The company is down 4.07% on the results and currently trades at $27.8 per share.
So should you invest in Pinterest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.