Pinterest stock (NYSE: PINS) recently released its Q4 results, with revenue slightly above but earnings missing the street estimates. It reported sales of $1.15 billion and adjusted earnings of $0.56 per share, compared to the consensus estimates of $1.14 billion and $0.64, respectively. However, a solid growth in user base and upbeat outlook resulted in its stock surging 19% on Friday, February 7. Separately, after a bleak outlook, Should You Pick Bristol Myers Squibb Stock At $57?
PINS stock, with 8% returns since the beginning of 2024, has underperformed the S&P 500 index, up 26%. Increased operational costs have tapered the company’s profitability, contributing to a weakness in its share price performance over the last year. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
How Did Pinterest Fare In Q4?
Pinterest’s revenue of $1.15 billion in Q4 reflected an 18% y-o-y growth, with Europe seeing a 21% rise and the U.S. and Canada up 16%. The top-line growth was led by a rise in monthly active users (MAUs) as well as average revenue per user. While MAUs were up 11% to 553 million, ARPU was up 6% $2.12. Notably, both of these metrics were better than the street estimates. Not only did Pinterest post a strong sales growth, its adjusted EBITDA margin expanded by 300 bps to 41% in Q4. The company’s earnings of $0.56 per share were slightly above the $0.53 figure seen in the prior-year quarter.
Looking forward, the company guided for $845 million in sales and adjusted EBITDA of $163 million in Q1, at the mid-point of the provided range. This outlook fares much better than the consensus estimate of $834 million and $139 million, respectively.
How Does This Impact PINS Stock?
Although Pinterest posted a mixed Q4, its stock has trended higher, amid a solid outlook and strong user engagement. But, if we look at a slightly longer period, the changes in PINS stock over the recent years have been far from consistent, with annual returns being considerably more volatile than the S&P 500.
In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and trade wars, could PINS underperform the S&P or will it see higher levels? At its current levels of $40, PINS stock is trading at 7.7x trailing revenues, marginally higher than the stock’s average P/S ratio of 7.3x over the last four years. Despite Pinterest’s recent stock gains, we believe further upside potential exists, supported by robust user growth, rising ARPU, and margin expansion. These improving fundamentals justify a premium to the stock’s historical valuation multiple. As an aside, rallying on a good quarter, see What’s Happening With AFRM Stock?
While PINS stock looks like it has more room for growth, it is helpful to see how Pinterest’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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