What happened
Shares of Pinterest (PINS +0.50%) were up 18.3% in August, according to data provided by S&P Global Market Intelligence. The company reported financial results early in the month that were better than Wall Street expected. It also has a new largest shareholder, which turned heads. And finally, the company has an under-the-radar project in the works that got some positive press late in the month.
So what
Pinterest released financial results for the second quarter of 2022 on Aug. 1. Companies that generate revenue from advertising -- like Pinterest -- are generally having a hard time in 2022. Therefore, expectations were low. But Pinterest surprised investors by reporting a 9% year-over-year increase in revenue, supported by 17% growth in average revenue per user.
NYSE: PINS
Key Data Points
The analyst community predominantly responded positively to Pinterest's Q2 results, with many modestly raising their price targets for the stock. But one investing professional outshone the rest. On Aug. 1, activist investor Elliot Management confirmed a July report that it was Pinterest's largest shareholder.
Among Elliott Management's reasons for buying Pinterest stock is its new CEO Bill Ready. In June, the company announced that Ready was taking over for Pinterest co-founder Ben Silbermann. In confirming its large position, Elliott Management said, "Bill Ready is the right leader to oversee Pinterest's next phase of growth."
Elliott Management gave Ready a nice vote of confidence. Days later, Ready gave a vote of confidence for Pinterest's future. According to a filing with the Securities and Exchange Commission (SEC) on Aug. 4, the new CEO purchased over 200,000 shares of Pinterest at market prices for $5 million.
Now what
Pinterest's stock has recently traded at its cheapest price-to-sales valuation since it went public in 2019. However, this is because the company's user base keeps falling -- it dropped 5% year over year in Q2. Consequently, its quarterly revenue growth rate has fallen off a cliff, and investors are rightly questioning if Pinterest has a large growth opportunity.
PINS PS Ratio data by YCharts
Pinterest might have a lucrative card up its sleeve, and reports late in August helped the stock surge higher. The company is testing an app called Shuffles. At the moment, it's only available for download via an invite. However, early results are overwhelmingly positive.
According to TechCrunch, the Shuffles collage-making app has already hit the top spot in the lifestyle category of Apple's App Store since it launched in July, although it's not in the top spot at the moment. However, if it was able to briefly achieve this status despite not being widely available for download, it suggests that Shuffles could be a wildly popular platform when it opens up to everybody, giving Pinterest not one but two big apps.
Could Shuffles be to Pinterest what Instagram is to Facebook (now Meta Platforms)? It's entirely too early to say. However, it's a reminder that top companies often find ways to keep growing their businesses, often in ways investors didn't foresee.
