Pinterest Inc. shares tumbled Friday, as analysts weighed in on the company’s first quarterly earnings since going public, with most seeming unfazed by bigger-than-expected losses.
The stock PINS, -13.48% which has been volatile since the company’s April IPO, were last down 11% at $27.56. They remain about 45% above their IPO price of $19.
The online scrapbooking company reported a net loss of $41.4 million, or 33 cents a share, on revenue of $201.9 million, up from $131 million a year ago that the company reported in filings for its IPO. After adjusting for stock-based compensation and other effects, the company claimed losses of 32 cents a share.
Analysts on average expected adjusted losses of 11 cents a share on sales of $200.7 million, according to FactSet.
Baird analysts led by Colin Sebastian said the numbers showed the company had a “solid start to 2019.”
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“While some media headlines suggest a revenue and/or earnings “miss,” we view this largely as noise given a few high-end estimates skewing consensus, and more important, the company’s ongoing strength in U.S. advertising growth and early signs of traction from international growth efforts,” they wrote in a note to clients.
FactSet analyst estimates include one for a loss of 32 cents and one for a loss of 29 cents, with most of those that are not restricted on the data terminal clustered around a loss of 13 cents.
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The company’s revenue was at the high end of the range it provided in its IPO prospectus, the Baird analysts wrote, while U.S. monthly average users of 85 million and international monthly average users of 206 million were in line with guidance. The company’s average revenue per user was 73 cents.
“While some media headlines suggest a revenue and/or earnings “miss,” we view this largely as noise given a few high-end estimates skewing consensus, and more important, the company’s ongoing strength in U.S. advertising growth and early signs of traction from international growth efforts.”
Adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, was a negative $38.4 million, better than the company’s guidance of $43.5 million to $41.0 million, they wrote.
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On its earnings call, executives said the company is focused on growing its international advertising business and was serving ads in 13 countries by quarter-end, up from seven in the fourth quarter.
“However, management cautioned there will be limited contribution from international growth initiatives or self-service platform improvements this year, with more upside potential as these product offerings scale through FY20,” said the Baird analysts.
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Baird said revenue guidance — of $1.055 bln to $1.080 billion — was in line with its expectations and the consensus numbers for 2019 are also skewed by a few outliers. Analysts reiterated their outperform rating on the stock and $36 price target, which is 33% above its current trading level.
“Overall, fundamentals are intact, and we view significant near-term weakness as an attractive buying opportunity,” said the note.
JPMorgan analysts led by Doug Anmuth agreed that the numbers were “mostly as expected.” They acknowledged that the company is still in investment mode, and is seeking to diversify its advertiser base by investing in self-service solutions for small and medium-size businesses, steps that will take time to show traction.
The analysts attributed the share decline to the guidance being a little below others’ expectations.
“We continue to believe that Pinterest’s early-stage international & self-serve offerings provide meaningful growth drivers over time, but they require strong, sustained execution & PINS cannot simply flip a switch on either one,” they wrote.
JPMorgan is sticking with its neutral rating on the stock and $32 price target.
Susquehanna analyst Shyam Patil took a slightly more bearish view, saying the numbers “could have been better.” The guidance was below his expectations and he expects some downward estimate revisions as a result.
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“It appears that PINS is taking a conservative stance toward key areas like self-serve and international monetization,” the analyst wrote in a note to clients. “While we continue to like the valuable core user base, social commerce niche, and potential monetization opportunity, we believe valuation is fair given the healthy premium to SNAP and would like to see more traction with international expansion and monetization.”
Patil lowered his 2019 revenue estimate by 9%, and cut his Ebitda and EPS forecasts. He reiterated a neutral rating on the stock but lowered his price target to $24 from $35.
Pinterest shares are down 5% on the week, while the S&P 500 SPX, -0.58% has fallen 0.4%.
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