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Why Pinterest Stock Just Popped 12.5%

By Rich Smith - Feb 7, 2020 at 10:21AM

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Earnings beat estimates by 50% and guidance looks sharp as a tack.

What happened

Shares of social media phenomenon Pinterest (PINS 7.89%) are marching higher -- up 11.8% as of 9:55 a.m. EST -- after the image-posting website announced powerful sales and earnings growth after-hours Thursday.  

Analysts had predicted that Pinterest would earn $0.08 per share (pro forma) on sales of $371.2 million. Instead, Pinterest reported pro forma profits of $0.12, and sales of $399.9 million.  

Finger pointing at pushpins on a blue field

Image source: Getty Images.

So what

Rounding up ever so slightly, Pinterest boasted that it hit "$400 million" in sales in Q4 2019, 46% year over year growth, and "exceeded $1 billion in revenue for the first time as a company. 2019 sales grew 51% year over year to $1.14 billion. On the downside, while Pinterest says it was more profitable than Wall Street expected on a non-GAAP (i.e. pro forma) basis, when judged under generally accepted accounting principles, the company still lost $0.06 per share for the quarter -- and lost $3.24 per share for the year.

On the plus side, operating cash flow finally turned positive in 2019 ($657,000). Subtracting capital spending from that, free cash flow ended 2019 at negative $33.1 million -- which was still less than half the cash burn Pinterest suffered in 2018, so a marked improvement.

Now what

Looking ahead to 2020, Pinterest made no promises of profitability, nor free cash flow. The company did, however, say it expects sales to surge ahead by a third, to $1.52 billion, with an "adjusted EBITDA margin of 1%," laying the foundations for continued "long-term growth and ... a more scalable business over time."

Judging from today's share price action, it seems investors agree with that prediction.

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