The COVID-19 pandemic hit digital-advertising companies hard in 2020. Even high-growth digital-advertising company Pinterest (PINS 1.02%), for instance, saw its revenue-growth rate plummet from the 51% growth it saw in 2019 to 35% growth in the first quarter of 2020. Then it slowed to just 4% growth in Q2.
What no one could have anticipated, however, was how strong and persistent the rebound would be for many digital-advertising companies -- Pinterest, in particular. Third-quarter revenue rose 58% year over year and fourth-quarter revenue soared 76% year over year. More importantly, management indicated that the tech company's elevated momentum is continuing into 2021.
Image source: Pinterest.
Continued momentum
When Pinterest announces its first-quarter results early next month, it's likely we'll see more staggering momentum from the company. Impressively, management guided for revenue in the first quarter of 2021 to grow at a rate "in the low-70% range year over year." And this view notably factors in an expectation for continued uncertainty related to the COVID-19 pandemic.
Importantly, analysts expect Pinterest's strong top-line momentum to translate to improved profitability. For the company's first quarter of 2021, the current consensus analyst estimate calls for non-GAAP earnings per share of $0.08, up from an adjusted loss per share of $0.10 in the year-ago quarter. For the full year, analysts forecast non-GAAP earnings per share of $0.85, up more than 100% from $0.42 in 2020 and breakeven in 2019.
Powerful catalysts
As companies begin ramping up their advertising budgets again following significant uncertainty last year during lockdowns, which caused many marketers to pause, reduce, or recalibrate their ad campaigns, many are handing over ad dollars to Pinterest. "We saw broad-based strength across advertiser verticals, sizes, and objectives, with the biggest improvement in growth from retail advertisers," said Pinterest CFO Todd Morgenfeld in the company's fourth-quarter earnings call.
Of course, fueling advertiser interest in Pinterest's platform is the company's incredible growth in monthly active users, which grew 37% year over year in Q4 to 459 million. This means Pinterest added over 100 million monthly active users during 2020.
Further, another up-and-coming catalyst for Pinterest's business is its shopping integrations, allowing consumers to purchase products without leaving the platform. This nascent vertical saw a sixfold jump in advertisers participating in this marketing tool during Q4. This promising tool, of course, is a priority for Pinterest in 2021.
"This year, we're planning to build on this momentum by continuing to help more businesses get their products on Pinterest and help Pinners discover, evaluate and buy products throughout their shopping experiences," explained Pinterest CEO Ben Silbermann during the company's earnings call. "Finally, we want to expand these features more globally, so that no matter where you live, you can shop on Pinterest."
The combination of advertisers ramping up their spending in a reopening economy, Pinterest's momentum with user engagement, and the company's investments in its new shopping vertical should help Pinterest meet or exceed its first-quarter guidance for 70%-plus year-over-year revenue growth during the period.
