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Pinterest IPO Has a Lot to Prove This Week

By Rick Munarriz – May 15, 2019 at 12:15PM

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The social discovery platform operator reports its first quarterly results as a public company on Thursday. We already know most of the numbers, but there will still be a lot to learn.

One of the unicorns to go public this year without losing its horn afterward is Pinterest (PINS -1.08%). The popular social discovery platform has been a market darling since going public at $19 last month. 

Pinterest stock is trading 53% higher than its offering price, making it one of this year's hottest debutantes. Its first big test as a public company will come Thursday when it posts its first quarterly report post-IPO. There won't be a lot of mystery in the financial update since the company offered a pretty detailed guidance on how the first three months of this year played out in its mid-April prospectus, but the outlook for the balance of the year and how management handles the report and the subsequent earnings call will make or break the stock's encouraging momentum. 

A Welcome to Pinterest marquee sign at Pinterest office in France.

Image source: Pinterest.

Pin it to win it

Pinterest will report its first-quarter results shortly after Thursday's market close. We have a general idea of some of the important measuring sticks heading into the update. Pinterest revealed in its prospectus that it had roughly 291 million monthly active users for the period, 22% more people than a year earlier. 

The dot-com darling also pegged revenue to clock in between $198.9 million and $201.9 million for the quarter, rising 51% to 54% above last year's first-quarter showing. The prospectus also has Pinterest's loss from operations narrowing slightly to between $47.5 million and $50.5 million with average revenue per user rising 22% to 24% to land at $0.72 or $0.73. Adjusted EBITDA should also narrow slightly to a deficit of $41 million to $43.5 million. 

The prospectus came out more than two weeks after the end of the actual quarter, so the only real shock here would be if results don't land at the stronger end of all of those ranges. In short, revenue should rise 54% to $201.9 million -- above the $200.6 million that advantageously lowballing analysts are targeting -- with a loss of operations of $47.5 million, negative adjusted EBITDA of $41 million, and average revenue per global user at $0.73. 

Pinterest is doing a lot of things right, and it's why revenue is growing a lot faster than its user base. The likely 54% increase in revenue in Thursday's report will be a combination of the 22% increase in active users and the 26% surge in average revenue per user. Like so many successful free online platforms, Pinterest is getting better at monetizing its traffic. Sure, there will be red ink, but this is shaping up to be the third year in a row of narrowing net losses for Pinterest. 

In a year when a couple of prolific IPOs are underwater, Pinterest is mastering the breaststroke. It's time to prove that the hot rookie can keep on swimming.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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