Pinterest reported solid third quarter results, reaching a new record high of 537 million monthly active users. This represents a significant increase of 15 million users compared to the previous quarter. Revenue for Q3 came in at $898 million, an 18% growth year-over-year.
With the holiday shopping season approaching, Pinterest is well-positioned for a strong finish to 2024. The platform’s focus on facilitating more shopping options and improving digital matching and try-on features continues to attract users. Pinterest’s AI-powered “Body Type Filters” and other enhancements are driving an improved shopping experience within the app.
However, these developments require substantial investment. Pinterest’s research and development expenses have risen by nearly 25% this year, a trend that is expected to persist as the company competes with other platforms heavily investing in AI. The unique appeal of Pinterest lies in its ability to allow users to save items and receive personalized style recommendations.
For brands, the platform provides a more comprehensive product display compared to traditional online stores. By fulfilling this role effectively, Pinterest can solidify its position as a key shopping destination. While the indicators for Pinterest are generally positive, with steadily increasing engagement and improving results, the company did miss earnings per share estimates by 26%.
Shares have declined by 8.9% over the past week following the earnings report.
Pinterest user growth drives revenue
Investors expressed concern over the revenue growth guidance for the fourth quarter, which at 15% to 17% was seen as underwhelming.
Bernstein analyst Mark Shmulik noted, “Worryingly for investors, the implied guidance would mark the third quarter in a row of decelerating revenue growth.
Pinterest stock has had a challenging year, down nearly 40% from its highs in late June. The company’s new leadership has prioritized partnerships with e-commerce giants to boost ad revenue. While these partnerships are viewed positively by analysts, they have not yet delivered substantial immediate gains.
CEO Bill Ready highlighted several positive aspects during the analyst call, including accelerating sales growth, the rapid expansion of lower-funnel advertising, and an unexpected 11% increase in global monthly active users. Pinterest’s partnerships are also expanding to Mexico and Canada. Analysts with buy calls on Pinterest remain patient.
BofA’s Justin Post reiterated a buy rating, anticipating “healthy growth vs industry” for 2025. CFRA analyst Angelo Zino upgraded his view to a “strong buy,” citing greater focus on shoppable content and international expansion as key growth drivers. However, Pinterest stock now sits below its 21-day and 50-day moving averages, further off its 200-day long-term support level.
The stock’s IBD Rating of 32 out of 99 indicates underperformance compared to most stocks over the past year. Despite the short-term challenges, the continued confidence of some analysts and positive signals in user engagement and partnerships suggest potential for a rebound. Pinterest’s strong EPS Rating of 97 out of 99 points to robust earnings growth in recent quarters.
