Earnings Results: Pinterest’s pandemic surge continues, stock jumps more than 25% toward fresh record highs

Pinterest PINS, -6.22% reported a third-quarter loss of $94.2 million, or 16 cents a share, on revenue of $442.6 million, up from $280 million a year ago. After adjusting for stock-based compensation and other factors, the company reported earnings of 13 cents a share, up from adjusted earnings of a penny a share a year ago. Analysts on average expected adjusted earnings of 4 cents a share on sales of $383 million.

Pinterest shares jumped more than 25% in after-hours trading following the report, after closing with a 7.1% decline at $48.78. Shares were topping $63 in the extended session after closing with a 6.2% decline at $49.25; Pinterest shares have never traded for higher than $53.87 in regular trading.

Pinterest shares have more than doubled to record highs since the social-media company’s last earnings report, which predicted much higher revenue and user growth than previously expected. The online-advertising market seems to have found strength despite the pandemic, as strong third-quarter financial results last week from Snap Inc. SNAP, +3.17% sent stocks in ad-supported online companies higher across the board.

Online-ad stocks also experienced a jump after Pinterest’s report, which arrived 24 hours ahead of quarterly reports from online-ad powerhouses Facebook Inc. FB, -5.51%, Alphabet Inc. GOOGL, -5.50% GOOG, -5.46% and Twitter Inc. TWTR, -5.34%. Twitter shares gained more than 5% in the extended session Wednesday, while Facebook stock increased more than 2% and Google parent Alphabet added about 1%.

The big surge by Pinterest stock has been attributed to an unexpected explosion in users on the company’s service, which is similar to an online scrapbook. In late July, Pinterest reported that monthly active users had jumped to 416 million, up from 367 million the quarter before. Analysts had expected Pinterest to add about 12 million new users in the quarter.

In Wednesday’s report, Pinterest revealed a monthly active user count of 442 million, up 26 million from the previous quarter. Analysts on average expected Pinterest to report more than 436 million users, after the previous quarter’s additions led to increased expectations.

In a letter to shareholders, Pinterest executives gave hints about the new users. They said that the growth has been particularly strong in users younger than 25; that the usage tends to pick up when shelter-in-place orders are in effect and wane when they are not; and that the users are looking for ideas for specific projects, such as building a home office.

“This means they tend to search more than older cohorts, a new-user trend that pre-dates COVID but that has accelerated since March,” Chief Executive Ben Silbermann and Chief Financial Officer Todd Morgenfeld wrote. “More searching on the platform raises the bar on serving relevant results (particularly more relevant ads), but search engagement also tends to have higher commercial intent, which represents a big opportunity for future growth, particularly as advertisers increasingly seek platforms that are able to deliver sales and conversions.”

Advertisers were also seeking a site not called Facebook. In a conference call Wednesday afternoon, Morgenfeld admitted that an advertisers’ boycott of Facebook in the third quarter was a “tailwind” for Pinterest’s business, but he also said that it may not last.

“On one hand, this group of advertisers accelerated their spend on Pinterest in Q3. On the other hand, the attractiveness of a positive, brand-safe consumer platform may wane somewhat after the U.S. election cycle is over in November, so some of that spend may wane too,” he said. “To be clear, we think the positivity of Pinterest is a long-term competitive advantage for many reasons, but it’s just difficult to predict near-term advertiser behavior, particularly in an election season.”

Not all of the growth was due to the pandemic nor a Facebook boycott, however. Pinterest executives said that about 4 million new users arrived at their website looking for ideas to customize their iPhone home screens after Apple Inc. AAPL, -4.63% offered the ability to personalize their background filters in an update to Apple’s mobile operating system. Morgenfeld said that Pinterest did not expect those 4 million users to stick around.

Pinterest executives said they expect revenue to grow around 60% year-over-year in the fourth quarter, roughly in line with the 58% growth in the third quarter. Pinterest reported revenue of $400 million in last year’s holiday period, so the guidance suggests sales of about $640 million this year, which again trounces expectations. Analysts on average predicted fourth-quarter revenue of $541 million, according to FactSet.

Pinterest stock has gained 165% so far this year, and more than 106% in the past three months, as the S&P 500 SPX, -3.52% index has gained 5% and 5.4% in those periods.