Despite mixed Q1 results, Pinterest stock (NYSE: PINS) jumped 14% in extended trading, primarily driven by an upbeat outlook and strong underlying growth. In Q1, Pinterest achieved revenue of $855 million – a 16% year-over-year increase fueled by a 10% rise in monthly active users (MAUs) to 570 million (beating the 565 million consensus) and a 5% increase in average revenue per user (ARPU) to $1.52 (meeting expectations).
Regionally, revenue grew by 24% in Europe and 12% in the U.S. and Canada. Although the reported adjusted EPS of $0.23 fell short of the $0.26 consensus, it still represented a significant improvement over the prior year’s $0.17. Furthermore, Pinterest demonstrated strong operational efficiency with a 300 basis point expansion in its adjusted EBITDA margin to 20%. Separately, see Google’s $1 Trillion Problem: Stock To Crash 40%?
For the upcoming second quarter, the company has provided a sales outlook of $960 to $980 million and an adjusted EBITDA guidance of $217 to $237 million. Notably, the revenue guidance exceeds the current consensus estimate of $966 million.
Given the current uncertain macroeconomic environment, marked by ongoing trade tensions and the Federal Reserve maintaining interest rates, a key question arises: Will PINS stock underperform the S&P 500, or is it poised for further gains?
Currently trading at $32, PINS stock has a price-to-sales (P/S) ratio of 5.8x trailing revenues, which is lower than its four-year average of 7.3x. We believe that Pinterest has upside potential due to its better-than-expected outlook and compressed valuation, further supported by robust user growth, increasing ARPU, and margin expansion. Notably, the average analyst price target of $40 suggests an additional 25% upside from its current level.
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