Pinterest (PINS) is scheduled to report results of its third fiscal quarter after the market close on Wednesday, October 28, with a conference call scheduled for 4:30 pm EDT. What to watch for:
1. GUIDANCE: In July, Pinterest declined to provide revenue or EBITDA guidance for 2020 given the uncertainties related to the ongoing COVID-19 pandemic and the rapidly shifting macroeconomic conditions. At the time, Pinterest said it expected that Q3 revenue will grow in the mid-30% range year over year. JPMorgan analyst Doug Anmuth expects "strong" results with July momentum carrying through Q3 on pent-up marketer demand, return of brand ad dollars, and company-specific products and initiatives. Anmuth believes the slowdown Pinterest suggested for the remainder of Q3 will prove too conservative.
2. UPGRADES AFTER SNAP EARNINGS BEAT: On October 21, Bank of America analyst Justin Post and Goldman Sachs analyst Heath Terry both upgraded Pinterest to Buy following Snap's (SNAP) earnings beat. Post upgraded Pinterest to Buy from Neutral with a $58 price target after Snap announced third quarter revenues that were significantly above consensus, which he reads as another sign of a strong online advertising rebound. While he has been hesitant on Pinterest's valuation and "uneven growth," Post said that advertising checks give him confidence in the company's strong user intent and ad platform innovation.
Meanwhile, Goldman's Terry also upgraded Pinterest to Buy from Neutral with a price target of $61, up from $37. Based on current app download data, Pinterest's "strong" user growth continued through third quarter, Terry said. The analyst noted that field checks, along with Snap's third quarter results, suggest that advertiser demand strengthened over the course of the quarter, particularly for smaller platforms like Pinterest. Terry believes Pinterest's long-term monetization opportunity should drive further outperformance of the shares given the "early stage nature" of the company's advertising technology and sales investments, particularly outside the U.S.
3. AD REVENUE: On October 20, Credit Suisse analyst Stephen Ju raised the firm's price target on Pinterest to $36 from $31 and keeps a Neutral rating on the shares. The analyst also raised his advertising revenue forecasts based on positive advertiser checks signaling ongoing recovery of budget growth for Pinterest - particularly as he believes nearly every single vertical where it has a more meaningful presence seem to have outperformed versus his expectations during Q3. Deutsche Bank analyst Lloyd Walmsley raised the firm's price target on Pinterest to $55 from $43 and keeps a Buy rating on the shares. The analyst is bullish on the online advertising names into the Q3 results given a continued ad recovery and a "strong" outlook for Q4. He sees a continued cyclical recovery and easy comps into 2021 driving accelerating growth and margin recovery, with potential for more share gains across online advertising.
4. NOT EXPANDING SF HEADQUARTERS: Pinterest, in late August, terminated its lease for approximately 490,000 square feet of office space to be constructed near its current headquarters campus in San Francisco, California. Instead, the company's present plan is to continue to lease its current buildings in downtown San Francisco and remain an active member of the local community. "As we analyze how our workplace will change in a post-COVID world, we are specifically rethinking where future employees could be based," said Todd Morgenfeld, CFO and Head of Business Operations of Pinterest. "A more distributed workforce will give us the opportunity to hire people from a wider range of backgrounds and experiences."
5. TOXIC WORKPLACE REPORT: Former Pinterest COO Francoise Brougher accused the company of gender bias in a new lawsuit, alleging she was fired in April after complaining about sexist treatment, The New York Times' Erin Griffith reported. In her suit, which was filed in San Francisco Superior Court, Brougher said she had been left out of important meetings, was given gendered feedback, was paid less than her male peers when she joined the company, and ultimately was let go for speaking up about it. Pinterest is reviewing the lawsuit, a company spokeswoman said.
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