Shares of Pinterest saw a sharp rise of 20% on Friday, following a promising first-quarter revenue outlook that went beyond market expectations.
Enhancing its advertising tools and attracting more brands to its platform, the image-sharing platform has been focusing on direct response ads, which encourage specific user actions such as app downloads and website visits.
A driver of this success has been its investment in automated advertising solutions, particularly its Performance+ suite. These tools have made it easier for advertisers to set up campaigns with fewer inputs. CEO Bill Ready highlighted this advantage, stating, “Advertisers that were using these tools required 50% fewer inputs to create a campaign now.”
Mark Shmulik, an analyst at Bernstein, noted, “If you’re a smaller ad platform, the less time and more automated you can make it for the advertisers, the easier it is to get them to try you out.” He added, “We think the progress Pinterest has shown is sustainable.”
In its fourth-quarter earnings report, Pinterest recorded revenue of $1.15 billion, slightly exceeding market estimates. The growth was driven by increased advertising activity from retail, technology, and financial services sectors, offsetting weaker spending from the food and beverage industry.
The platform also reported an 11% increase in global monthly active users, reaching a record 553 million.
At least 27 brokerage firms have raised their price target for Pinterest following its earnings announcement. If the current momentum holds, the company stands to gain over $4 billion in market value, adding to its previous valuation of $22.7 billion.
Pinterest’s stock has historically been sensitive to earnings reports. In November, shares dropped 14% after a weaker holiday quarter forecast, but in April last year, the stock jumped 21% following strong first-quarter results.
For the upcoming quarter, Pinterest has projected revenue between $837 million and $852 million, surpassing analysts’ average estimate of $832.8 million. Its adjusted core earnings forecast, ranging from $155 million to $170 million, also outperformed expectations.
Even with its strong performance, Pinterest’s stock trades at 17.88 times its estimated earnings for the next year—lower than Meta’s 27.37 times and Snap’s 25.40 times.
However, analysts are bullish on the company’s growth, with Citi analysts reaffirming their “buy” rating, saying they have “greater conviction that Pinterest is in the earlier days of its transition to an always-on, performance platform.”
