What happened
Shares of Pinterest (PINS -1.55%) were up 42% in October, according to data provided by S&P Global Market Intelligence. Two big events triggered the outsized monthly return: First, investors became increasingly optimistic for Pinterest's prospects after Snap reported strong results for its quarter. Then, a week later, Pinterest confirmed the optimism by posting blowout results of its own.
So what
After the market closed on Oct. 20, Snap reported earnings that topped analyst expectations. Since the company's revenue is ad-based, it was a clear signal to investors that advertising spending was on the rise. Pinterest stock popped on Snap's results in anticipation of Pinterest's third-quarter results.
Image source: Getty Images.
Pinterest didn't disappoint when it reported on Oct. 28. The company's Q3 revenue increased 58% year over year to $442.6 million. For perspective, management had only guided for revenue growth in the mid-30s range. It's worth noting that management saw revenue go up 50% for much of July, but it wrongly assumed the growth would slow down as the quarter progressed. The opposite happened, and that's partly why this growth stock soared.
Now what
Pinterest stock also soared because revenue growth isn't slowing down going into the fourth quarter, and management is now guiding for 60% year-over-year growth. Consider that other companies with ad-based revenue have likely received a boost due to the surge in political ads during the third quarter. By contrast, Pinterest doesn't allow political ads, which makes its gains in Q3 and the forecast for Q4 even more impressive.
