What happened
Pinterest (PINS -0.52%) stock popped nearly 13% this morning, setting off an afternoon chain reaction among other advertising-dependent social media stocks including Snap (SNAP -2.72%), Twitter (TWTR), and even reviews website Yelp (YELP 0.60%).
As of 1:45 p.m., shares of Snapchat owner Snap are up 9.3%, Twitter stock is flying 9.8% higher, and Yelp stock is up most of all -- 11.7%.
Image source: Getty Images.
So what
Why is Pinterest's move higher sparking this reaction elsewhere in the sector?
As my fellow Fool Evan Niu pointed out earlier today, Pinterest pre-announced its sales figures (but not earnings) for the first fiscal quarter of 2020. Revenue this quarter, noted the company, is coming in ahead of expectations for less than $267 million, and looks to be ranging closer to between $269 million and $272 million. Not only is this better than expected, it represents potentially nearly 35% sales growth in comparison to last year's Q1 -- not at all the result you'd expect from an advertising-dependent business working its way through one of the nastiest recessions yet seen in American history.
Monthly active users (MAUs) numbers are also looking to come in strong, with Pinterest predicting they will range from 365 million to 367 million, far more than the 345 million MAUs Wall Street had predicted.
Now what
In a note today, investment banker Deutsche Bank commented that the trends Pinterest is describing "appear to be slightly better than feared," and this could bode well for advertising-dependent rivals such as Google, Facebook, and Snap. Now it seems that, not only are investors agreeing with this assessment, but they're adding Twitter and Yelp stocks to that list of companies that could see revenues hit less hard than predicted by the drop in social media advertising.
One word of caution, though: While investors are responding positively to Pinterest's news, Pinterest itself was very clear in explaining that "we began to see a sharp deceleration" in ad spending toward the end of March, and this weakness extends "across nearly the entire advertising market."
Even if Pinterest dodged a bullet in Q1 -- and even if it turns out that other tech stocks were similarly lucky -- that doesn't necessarily mean that any, or all, of these stocks will get lucky again in the next quarter.
