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Pinterest Q2 Earnings: Can It Meet High Expectations?

Image-based social media app maker Pinterest (NYSE: PINS) experienced a surge in new customers and increasing engagement from existing customers at the onset of the pandemic. Interestingly, however, revenue did not surge initially because advertisers pulled back on marketing.

As economies are reopening, advertisers are ramping up spending again, and Pinterest expects to reap the rewards. Management guided investors to look for robust revenue growth from the social media app. Expectations were further juiced when rival Snap (NYSE: SNAP) reported excellent quarterly earnings results last week that beat analysts' estimates.

Pinterest is guiding investors to look for revenue growth of 105% when it reports second-quarter results. Image source: Getty Images.

Keeping up with the competition

Fueled by a rebound in marketer spending, Pinterest reported year-over-year revenue growth of 78% in its first quarter. As economies are reopening, marketers are boosting spending to get the word out that they are open for business. Still, the reopening of economies harms the growth in monthly active users (MAUs) and engagement on Pinterest.

Management said this in the first-quarter press release: "Starting in mid-March, the easing of pandemic restrictions slowed U.S. MAU growth and lowered engagement year over year as people spent less time online. In Q1, we saw good retention of the MAUs we gained during 2020, but we still don't know if or how long this retention will last."

The company is not too pessimistic. Management guided for revenue growth of 105% in the second quarter from the same time last year. It will be similar to rival Snap's second-quarter revenue growth of 116% if it hits that target.

But Pinterest is far behind Snap in average revenue per user (ARPU). While Snap's global ARPU was $2.74 in its first quarter, Pinterest's was $1.04. In its efforts to raise that figure, Pinterest is developing international markets, launching advertising features in Brazil last quarter, and expanding to Mexico in May. That focus can go a long way in closing the ARPU differential. Investors should look out for what management has to say on the progress of these international investments.

Additionally, it will be important to look at MAU growth in the U.S. Snap reported sequential growth in a similar metric. If Pinterest can match that growth, it could be a nice surprise. Management guided investors that it did not expect to grow MAUs in the U.S.

What this could mean for investors

Analysts expect Pinterest to report revenue of $561.88 million and earnings per share of $0.13. The EPS figure will be a turnaround compared to the net loss of $0.07 reported in the same period a year ago. Meanwhile, the revenue figure would be 106.5% higher than the number reported last year.

Pinterest's stock price is up 16% year to date after popping in sympathy with Snap's earnings results. If Pinterest meets or beats expectations for the current quarter and delivers better-than-expected guidance for the next quarter, its shares have room to go higher. Rival Snap's stock price is up over 50% in 2021, and its shares jumped more than 25% following the release of its second-quarter results.

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Parkev Tatevosian owns shares of Pinterest. The Motley Fool owns shares of and recommends Pinterest. The Motley Fool has a disclosure policy.


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