Discovery and search social media platform Pinterest (PINS -0.64%) has been on a rollercoaster ride over the last few years. Today, the stock sits close to 70% below an all-time high achieved in early 2021. Wall Street has punished the stock as the boost the company received from user engagement and robust ad spend when much of the world was sheltering at home in portions of 2020 and 2021 has subsided. Revenue growth slowed and monthly active user growth turned negative.
But investors who look closely enough at the company's fourth-quarter results will find some positive signs for the business. Though slow top-line growth and weak revenue guidance ultimately suggest the company isn't out of the weeds yet. Nevertheless, it's good to see progress in some areas.
To get a better understanding of the state of Pinterest's business today, here's a look at three key takeaways from the tech company's earnings report.
1. Revenue growth outpaced Meta's
There are a couple of ways to look at Pinterest's fourth-quarter growth. The major headline for the quarter is that fourth-quarter revenue decelerated from 8% growth in Q3 to just 4% growth in Q4. This meant the company's $877 million in fourth-quarter revenue missed analysts' average forecast for about $886 million.
But the growth can be viewed in a more positive light as well. Considering the uncertain macroeconomic environment the company is operating in, it's encouraging to see growth at all. In comparison, Meta's fourth-quarter revenue fell 4% year over year. Even more, Pinterest is guiding for growth in Q1 (albeit a small growth rate between about 1% and 4%) while the midpoint of Meta's guidance range for first-quarter revenue calls for another quarter of declining revenue.
2. User growth resumed
Perhaps the most encouraging takeaway from the report was a return to growth in monthly active users. Pinterest's monthly active users grew 4% year over year in Q4. This follows a 9% decline in monthly active users in the first quarter of 2022, a 5% decline in Q2, and flat growth in Q3.
It's also worth noting that Pinterest's monthly active users grew sequentially, too. Q4 users were up 1% from Q3.
Management noted investments in relevance and personalization as key drivers of monthly active user growth during the quarter.
3. Pinterest announced a meaningful buyback program
Finally, the company's management team is showing a sign of confidence in its business by announcing a $500 million share repurchase program while it stock is down about 70% from all-time highs. The $500 million authorization is for a period that covers the next 12 months, and management said in the company's earnings call that it intends to fully exhaust these funds during this timeframe. As of this writing, the authorization amounts to more than 2.5% of the company's current market capitalization.
The buyback strategy, management said, reflects the company's commitment to providing long-term shareholder value through both business growth and capital allocation strategies.
Overall, Pinterest's fourth-quarter results show a company executing well during a challenging time. But investors may want to wait to see if revenue growth can accelerate to strong, double-digit rates before considering investing in the stock. The current valuation prices in strong growth in revenue and profits for years to come.
