Snap stock and shares of Pinterest and Reddit will be in the spotlight when the social networks post quarterly results that are expected to offer insights into the strength of the digital advertising market. Pinterest stock is leading off, with earnings due later today.
Reddit is looking to build off a strong market debut. Pinterest and Snap impressed with strong sales growth in their first quarter reports. Both companies slumped amid a decline in the digital ad market in 2022 but are showing signs of bouncing back. But shares of Pinterest and Snap are trading well below highs from 2021.
The smaller social media stocks are each fighting for share in a social media advertising market dominated by Facebook parent Meta Platforms.
Google parent Alphabet, meanwhile, is the market leader for digital advertising overall. Investors reacted with some concern when Google last week reported lower-than-expected ad revenue for its YouTube business. While search-related ad revenue came in strong, the mixed report sent shares of Meta, Snap, Pinterest and Reddit lower along with Google last week.
Meta itself reports earnings on Wednesday, July 31. But here is what investors are watching for from its smaller rivals.
Pinterest Stock: Analyst Sees Positive Setup Post-Pullback
Pinterest is up first, reporting second quarter results on Tuesday, July 30.
Shares are up more than 30% over the past 12 months but momentum has slowed, with just a 5% gain year-to-date.
For its June-quarter report, analysts polled by FactSet expect Pinterest to post adjusted earnings of 28 cents per share on sales of $849 million. That would mark a 33% year-over-year earnings increase and 20% sales increase.
Analysts with New Street Research have picked Pinterest as their top pick among small and midcap internet stocks. New Street analyst Dan Salmon reiterated that view in a report Thursday.
"After pulling back roughly 15% from recent highs in the mid-$40 range, we think the set up for (Pinterest) is positive," Salmon wrote. "Potential catalysts for the stock include news of expanded third-party partnerships (more partners, more countries, etc.) and the expansion of PINS recently launched AI-driven ad buying product, Performance+."
Last year, Pinterest struck a partnership to run third-party ads from Amazon on its platform in the U.S. Pinterest announced a similar deal with Google for international markets during its February earnings call.
Pinterest saw a significant acceleration in its sales growth with its first quarter report. The company's sales grew 23% year-over-year for the March quarter , compared to 12% year-over-year sales growth for the firm in the fourth quarter of 2023.
Snap Stock: Upside To Estimates?
Snap, meanwhile, reports Q2 earnings on Thursday, Aug. 1.
Snap stock is up 16% from its price 12 months ago but down 17% compared to the start of the year. Shares surged following Snap's strong Q1 report but have given back those gains.
For its June-quarter report, analysts polled by FactSet expect Snap to earn an adjusted 2 cents per share on sales of $1.25 billion. That would mark a 33% year-over-year earnings increase and 17% sales increase.
Similar to Pinterest, Snap saw a big jump in sales growth last quarter. Revenue grew 21% in Q1, compared to 5% in Q4 2023.
Jefferies analyst James Heaney rates both Pinterest and Snap stock as buys. But he told clients Friday that Snap may have the better setup for the upcoming round of Q2 earnings.
"Pinterest remains our top pick for 2024 as we see several upside drivers (e.g. third-party partnerships, direct links)," Heaney wrote. "However, we prefer the Q2 setup for Snap given continually improving ad checks and the stock down roughly 20% in the last month. We also believe Snap more upside to street EBITDA over the next few quarters."
EBITDA refers to earnings before interest, taxes, depreciation, and amortization.
Reddit Stock: Second Earnings Post-IPO
Reddit, which completed an initial public offering in March, will report second quarter earnings on Aug. 6. Reddit stock has gained 73% from its IPO price of 34 and 16% from its first-day closing price.
For its second quarter report, analysts polled by FactSet expect Reddit to post a loss of 32 cents per share on sales of $253 million.
Analysts with Piper Sandler hold a positive overweight rating for Reddit heading into the report. Analyst Thomas Champion said data tracked by Piper Sandler showed strong monthly active user performance. The analysts also like the deal Reddit struck earlier this year to license its data to OpenAI for training large language models.
"We see upside from the OpenAI deal, plus street 2Q ad estimates look very conservative," Champion wrote. "Shares are up since the IPO, but we see a low bar at roughly $250 million in 2Q revenue and roughly $11 million in EBITDA."
Snap Stock Vs. Pinterest Stock Vs. Reddit Stock
Meanwhile, Pinterest trails only Semrush for the top spot in the 75-stock Internet Content industry group tracked by IBD. Pinterest has an 88 out of a best-possible 99 Composite rating, according to the IBD Stock Checkup tool.
The Composite Rating combines five separate proprietary ratings in one rating. The best growth stocks have a Composite Rating of 90 or better.
Snap is 20th in the group with a Composite rating of 41 out 99. Reddit is ninth with a Composite Rating of 60 out of 99.
