Pinterest, Inc. (PINS) is an online platform for visual idea discovery and sharing in the United States and internationally. The company’s engine allows people to find ideas, provides videos, products, and idea pins, and offers organizing and planning tools.
The platform has noted a surge in user engagement, with individuals returning more frequently and engaging more deeply. This shift is partly due to the company’s success in transforming the platform into a more actionable and shoppable space.
“In Q2, we continued to build momentum with consumers and advertisers while further accelerating our pace of innovation,” Pinterest CEO Bill Ready said in a statement.
However, PINS faces intense competition, changing consumer preferences, and impending regulatory changes. Moreover, the changing global economic landscape significantly impacts the company’s expansion strategy. Innovation, therefore, remains quintessential for maintaining relevance in a dynamic market.
For the upcoming third quarter, PINS forecasts a high single-digit annual rise in revenue. The company expects non-GAAP operating expenses to elevate marginally year-over-year in the low single-digits. The company’s second-quarter expenses grew faster than revenue.
So, I think this is not the most suitable entry point in the stock. To develop a more complete understanding of the situation, let’s delve deeper into some of its key metrics.
Analyzing PINS’ Financial Performance
PINS’ trailing-12-month net income from 2020 to 2023:
- On September 30, 2020, PINS registered a net income of negative $371.88 million, marking a low starting point.
- PINS reduced its negative net income over consecutive periods, reaching negative $128.32 million by December 31, 2020, and a slight negative $8.80 million by March 31, 2021.
- A prime turning point occurred in mid-2021 when PINS emerged from negative figures. On June 30, 2021, PINS posted a net income of $161.36 million. This increase was followed by an even sharper rise to $349.58 million by September 30, 2021.
- The firm’s net income, however, did not maintain this upswing. By December 31, 2021, it dropped to $316.44 million before climbing again to reach a peak of $332.83 million at the end of the first quarter 2022.
- The succeeding quarters showed a significant decline, with the net income decreasing from $220.34 million on June 30, 2022, to $61.16 million by September 30, 2022.
- Closing 2022, PINS faced a downturn as it dipped back into the red and recorded a negative net income of negative$96.05 million.
- The downward trend persisted into 2023, with PINS registering a sharp drop to negative $299.34 million as of March 31 and then further to negative $291.21 million by June 30, 2023.
Focusing on recent data, it can be seen that PINS has had a notable decrease in net income, ending June 2023 at a negative $291.21. Given the start and end points of this series, there is a clear negative growth rate when measuring from September 2020 to June 2023, reflecting a challenging financial state for PINS. However, it's also important to remember that during this period, PINS did experience periods of profitable net income.
Based on the provided data, it can be observed that the Return on Sales (ROS) of the company identified as PINS showed significant fluctuations from September 2020 to June 2023.
- In September 2020, the reported ROS was negative 0.27.
- This improved to negative 0.08 by December 2020.
- By March 2021, the ROS continued to make a positive upward trend reaching negative0.01, and two consecutive quarters witnessed an increase and peaked at 0.15 until September 2021.
- However, the figures began to slump in December 2021, amounting to 0.13.
- Post 2022, the ROS continued to fall gradually, with it dropping to 0.03 by September 2022.
- A disappointing downturn is observed as it dropped to negative 0.03 by December 2022.
- The first half of 2023 marked a decline, recording the lowest ROS values of negative 0.11 and negative 0.12, respectively, in March and June of the year.
In summary, despite the rise in ROS seen between March 2021 and September 2021, PINS appears to portray an overall negative growth rate, given that the last value (negative 0.12 on June 2023) is lower than the starting value (negative 0.27 on September 2020). This suggests a struggle in turning a profit from its revenue over the reported period. The more recent developments in 2022 and 2023 reveals declining profitability for the company, suggesting that more analysis may be necessary on the company's operations and strategies.
Summary:
- On September 30, 2020, PINS reported an ROA of negative16.1%, which started a downward trend.
- By December 31, 2020, the ROA improved to negative 5.4%, and improved further to negative 0.4% by March 31, 2021.
- From March 2021, the company experienced an upward trend in the ROA, reaching a positive ROA of 12.3% in September 2021.
- This trend, however, started to diminish towards the end of 2021 and into 2022, with the company reporting a slight decrease at 10.3% in December 2021 and then decreasing more significantly to 1.7% by September 2022.
- The biggest decrease occurred from December 2022 into 2023, where the company reported a negative growth rate, declining from negative 2.6% in December 2022 to negative 8.1% in June 2023.
Growth Rate Calculation:
- The growth rate of PINS’ ROA was calculated from the first value (negative16.1% in September 2020) to the last value (negative 8.1% in June 2023), showing a negative growth rate of approximately 50% during this period.
The Current Ratio of, PINS, has shown a fluctuating trend over the years, according to data ranging from September 2020 to June 2023.
- Starting at a 10.72 ratio on September 30, 2020, the company’s current ratio experienced an upward trend reaching its highest point of 14.22 by March 31, 2022.
- However, since this peak, a steep downward trajectory brought the ratio to its lowest point of 9.08 by December 31, 2022.
- This was followed by a slight increase to a ratio of 10.25 in March 2023, before once again falling to 9.19 by June 30, 2023, the end of the observed period.
Significantly, there is a general declining trend in the more recent data, particularly noticeable during the year 2022. This suggests that the company has been finding it increasingly challenging to cover its short-term obligations in recent times. Calculating the growth rate from the first data point (September 30, 2020) to the last (June 30, 2023), we find that overall, the current ratio had decreased by about 14.29%. This implies that despite the fluctuations, PINS’ ability to cover its current liabilities with its current assets has weakened over the observed period.
The asset turnover of PINS has shown some notable fluctuation over the given period. Here is a summary of the trend:
- Starting from September 2020, with an asset turnover of 0.60, the value increased fairly consistently till third quarter of 2021.
- In September 2021, it reached a peak of 0.86, marking a significant increase of roughly 43% in a year.
- After this peak, the asset turnover showed a downward trend hitting 0.757 at the end of December 2022. This marks an approximate decrease of 12% from its peak.
- A minor resurgence was observed in second quarter of 2023 with the value rising to 0.802 before the data ends.
While the asset turnover demonstrated an upward trend initially through to third quarter 2021, there’s been a more recent downward trend from fourth quarter 2021. Therefore, while the overall growth from the first to last values shows an increase of approximately 27%, the past year and a half highlights a more worrying downward trend since the peak in third quarter 2021.
Analyzing PINS’ Share Price Fluctuation: An Insight from April to September 2023
- On April 6, 2023, the price started at $27.77.
- It reached a peak of $28.16 on April 14, after which there was a general decline. - By April 28, 2023, the price had dropped to $26.35. It then fell sharply to $21.33 on May 5, 2023, marking the month of May as a period of significant depreciation for the PINS shares.
- However, the share prices began a slow recovery in late May 2023, beginning with $21.46 on May 12, 2023, and reaching upto $23.81 by May 26, 2023.
- June 2023 saw a sustained rise in the price, moving from $23.81 on June 2, 2023, to $27.07 by June 30, 2023.
- July 2023 witnessed further growth in the share price, peaking at $29.33 on July 21, 2023. However, the month concluded with a decrease in the price to $27.60 on July 28, 2023.
- The month of August 2023 illustrated a slightly volatile trend but ended at a higher value than it started. Beginning with $27.99 on August 4, 2023, the price dipped to $26.21 on August 18, 2023, before rising again to reach $27.43 by September 1, 2023.
- The share price mildly fluctuated through September, peaking at $28.03 on September 8, 2023, and closing at $27.03 on September 29, 2023.
In summary, the growth rate was initially negative through early May, after which it gradually began to rise again. The trend accelerated through June and July before becoming slower and less predictable in August and September. Here is a chart of PINS' price over the past 180 days.
Assessing PINS' POWR Ratings Performance: Quality, Growth, and Sentiment
PINS has an overall C rating, translating to a Neutral in our POWR Ratings system. It is ranked #16 out of 58 stocks in the Internet industry.
The three most significant dimensions of the POWR Ratings for PINS from April to September 2023 include Quality, Growth, and Sentiment.
Quality: The Quality score has remained consistently high throughout this period. It started off at 90 in April 2023. This value increased slightly every month, ending at an impressive 96 by September 2023. This is a clear indication of the consistent or improving quality associated with (PINS).
Growth: The Growth rating underwent a notable change. It saw a jump from 24 in April 2023 to 62 in May 2023. The rating remained stable around the 60s range till July 2023, after which it climbed to 67 and maintained this level through September 2023.
Sentiment: The Sentiment dimension displayed a relatively inconsistent trend. From starting at a low of 27 in April 2023, the sentiment shot up to peak at 89 in August 2023 before dropping back down to 57 in September 2023. Nevertheless, overall growth compared to the initial rating is evident. The highest rating amongst these features is consistently found in the Quality dimension, while both the Growth and Sentiment ratings demonstrate clear trends of increment over time.
How does (PINS) Stack Up Against its Peers?
Other stocks in the Internet sector that may be worth considering are LINE Corporation (LN), Yelp Inc. (YELP), and Travelzoo (TZOO) -- they have better POWR Ratings.
What To Do Next?
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PINS shares were trading at $27.01 per share on Monday afternoon, down $0.02 (-0.07%). Year-to-date, PINS has gained 11.24%, versus a 12.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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