Pinterest (PINS -1.13%) stock surged after the company released its fourth-quarter and 2021 earnings. The San Francisco-based company managed to grow revenue and earnings amid challenging conditions.
Also, the increase in the social media stock came at a time when Pinterest and its peers have struggled to maintain interest in their platforms. Given this rise in the stock price under such conditions, is now the time to consider Pinterest stock?
For the fourth quarter of 2021, Pinterest brought in $847 million, 20% more than in the same quarter of 2020. This beat consensus estimates as analysts had expected $827 million. Also, non-GAAP (adjusted) net income rose 15% over the same period to $339 million, exceeding analyst expectations.
The non-GAAP numbers excluded about $165 million in share-based compensation and non-cash charitable contributions. Still, massive increases in sales and marketing expenses weighed on earnings as that expense category climbed 62% on a non-GAAP basis.
For 2021, the company reported almost $2.58 billion in revenue. This rose 52% from year-ago levels and slightly beat consensus analyst estimates of $2.56 billion. Also, 2020 non-GAAP net income came in at $778 million, increasing 175% from 12 months ago.
The pain continued on the usage front as monthly active users in Q4 dropped to 431 million, 6% less than in the year-ago period. This was the third consecutive sequential drop, occurring as users spent less time at home amid the end of COVID-19-related lockdowns. It also stands in contrast to consistent user growth both before and during the pandemic.
However, monetization improved significantly as global average revenue per user (ARPU) climbed to $1.93 for the quarter and $5.79 for the year. This represents a year-over-year improvement of 23% and 36%, respectively.
These trends should continue as the company expects revenue growth in the high teens for the first quarter of 2022, just slightly less than the 20% reported in the previous quarter.
Pinterest rose by around 5% in morning trading following the report. This stands in contrast to the stock's 12-month performance. Over the last year, Pinterest has fallen by more than 65%.
Still, investors may have good reason to overlook the negatives of its quarterly performance. Indeed, even if it meets Q1 forecasts for a revenue increase in the high teens, it still would outperform Meta Platforms, which estimates between 3% and 11% revenue growth in Q1.
Moreover, other social media and e-commerce platforms have experienced slowing revenue growth amid reopenings. Amazon's Q4 net sales climbed by only 9%, well under the 22% increase for 2021. This makes Pinterest's decline in MAUs more understandable.
Also, despite that drop, the fact that ARPU climbed 23% in Q4 shows Pinterest can create significant growth even in challenging economic conditions. This included 62% international growth in Q4 to $0.57. When considering the $7.43 ARPU in the U.S., it conveys the company's tremendous potential to drive revenue increases abroad.
Furthermore, Pinterest sells for just above 50 times earnings, a relatively low valuation in an industry where many competitors do not even earn a profit and trade at higher levels. Though it trades significantly above Meta's 17 P/E ratio, the considerably faster revenue growth of Pinterest could make it a more attractive choice right now.
Should I consider Pinterest after earnings?
Both the report and stockholder reactions appear to point to a buying opportunity for Pinterest. Indeed, slowing revenue growth and the ongoing declines in the user base continue to weigh on the company. Nonetheless, Pinterest has shown it can grow revenue and earnings in the face of these conditions, bolstering the argument that investors should perceive the company as a value play right now.
Moreover, user growth could more closely resemble pre-pandemic levels once societies move past the reopening phase. That could put the company on a path to renewed growth.