Topline
Shares of post-sharing firm Pinterest are soaring Thursday after a third-quarter earnings release revealed that the firm’s better-than-expected results were boosted this summer by advertiser boycotts of billionaire-founded social media juggernauts Facebook and Twitter.
Key Facts
While the broader stock market struggles to recover from a massive sell-off this week, shares of Pinterest are surging 30% on Thursday after a bullish third-quarter earnings report that beat Wall Street expectations; Pinterest stock is now up nearly 40% this year.
The San Francisco-based firm reported third-quarter revenue of $443 million–its highest ever–up 58% over last year and 15% more than analysts were expecting; that surge helped trim the firm’s net loss of $94 million in the quarter by 25% from last year, resulting in adjusted earnings per share that also beat expectations.
Though he didn’t name Facebook or Twitter, Pinterest’s chief financial officer, Todd Morgenfeld, said the firm’s third-quarter revenue received unexpected tailwinds from advertiser boycotts of other social media that began in July, leading them to accelerate their spend on Pinterest.
User growth also surged to new highs both domestically and internationally, with the firm nabbing 442 million monthly active users by the period’s end, 37% higher year over year.
Pinterest averages a solid buy rating and a $45.26 price target based on 24 analysts issuing such guidance on the firm; that’s more than 50% above current price levels of roughly $65.
Following the bullish third-quarter earnings release, JPMorgan’s Doug Anmuth and MKM Partners’ Rohit Kulkarni upgraded Pinterest on Thursday to price targets of $75 and $66, respectively, with Kulkarni saying that the company’s ability to monetize user growth is “clearly sustainable.”
Key Background
Earlier this summer, corporate heavyweights joined more than 1,000 businesses in deciding to boycott advertising on social media giant Facebook starting in July, dubbing the movement #StopHateForProfit. Organized by civil rights groups including the Anti-Defamation League and the National Association for the Advancement of Colored People, the campaign pushed for Facebook to examine and end algorithmic bias and hate speech on its platform. The movement ended up drawing participants like McDonald’s, Starbucks, Disney and Coca Cola–and ultimately extended beyond the month-long period originally intended. It also hit other platforms, like Twitter, LinkedIn and Alphabet-owned YouTube.
Crucial Quote
“We saw much more demand for our advertising services than we expected in the third quarter,” Morgenfeld said in a post-earnings conference call on Wednesday, citing increased spend from the group of advertisers boycotting other social media–a trend he expressed may not be sustainable. “Pinners may likely plan for the holidays differently, and it’s hard to know how marketers will respond to these changes. [An] unknown is the tailwind we’ve experienced from the advertiser boycott of social media that began in July… 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 weigh in too.”
What To Watch For
A slew of big tech companies–including Facebook, Twitter, Amazon, Apple and Google-parent Alphabet–are set to report earnings Thursday after the market closes, shining a light on a sector that’s been outperforming during the pandemic, and pre-election uncertainty. Wall Street analysts are bullish on the lot. Like Pinterest, Facebook has seen an influx of spend from retail and ecommerce, says Corinne Demadis of New York social media advertising firm Smartly.io, and Pivotal Research analyst Michael Levine said last week that ad spend should bode well for Facebook, despite the boycott, as it did for Snap and Pinterest in their earnings reports.
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