Shares of visual search and idea platform Pinterest (PINS +0.50%) skyrocketed on Tuesday, following the company's third-quarter earnings report. While its stronger-than-expected third-quarter results and robust fourth-quarter revenue guidance were obviously key to the tech stock's big move higher, there was likely more behind the move than the details provided in the earnings release. For instance, investors may want to listen to Pinterest's earnings call to see if there was even more bullish information shared by management during the call.
As it turns out, the call was packed with useful information for investors -- and some good reasons to be bullish. Here are three must-see takeaways from the call.
NYSE: PINS
Key Data Points
1. Pinterest solves a key consumer pain point
Have you ever had dozens of tabs open as you shop for items on the internet and compare prices and product attributes? Pinterest is solving this pain point, management says.
"[Solving this pain point] is a core strength of Pinterest," explained Pinterest CEO Bill Ready during the call.
Ready said that this ability to create an intelligent shopping experience across many third-party sellers and e-commerce destinations from one central location is unique to its platform.
"And so as we're leaning into that," Ready added. This strategic effort to double down on solving this pain point is morphing into a key differentiator for the company, management explained.
2. The advertising market is stabilizing
During times of uncertainty, investors look for management to provide clues that the macroeconomic environment isn't deteriorating. From Pinterest's view, it isn't. Indeed, advertiser demand seems to be stabilizing.
One way this is showing up is the trend the company is seeing in its average price of ads. Though ad prices on its platform were down 12% year over year, this was a huge improvement from 20% year-over-year declines in pricing last quarter. Management said this was driven by a combination of "industrywide demand stabilization" and the company's artificial intelligence-driven efficiencies gained across its ad stack during the quarter.
One area, in particular, that Pinterest has seen strength recently is retail -- particularly from its "larger, more sophisticated advertisers," Ready said.
Management said this stabilization is reflected in both its revenue growth acceleration in Q3 and its guide for double-digit year-over-year growth in revenue in Q4.
3. AI is becoming integral to Pinterest's business
One of the most repeated keywords during the call was artificial intelligence (AI).
"We continue to use AI to improve the relevance and personalization of our content recommendations and satisfy user intent on our platform through improved shopping experiences," said Ready.
In one example of how Pinterest is using AI, it's pairing it with large language models "to more precisely link product metadata to user queries to show ads that are visually and contextually relevant," Ready said. Doing this "drove meaningful improvements across cost per click and cost per action and better ads relevance."
With Ready calling AI a "great source of strength" for the company, investors should expect Pinterest to continue investing in it. Fortunately, it looks like it's already additive to the company's business performance; so shareholders are in the fortunate position of being able to see results from these investments quickly.
Pinterest's momentum in AI, a stabilization in advertiser demand, and its improving differentiation as a place for a unique and seamless shopping experience position the company well for a potentially solid fourth quarter and a strong 2024. With momentum like this, Pinterest's top-line growth could continue accelerating.
No wonder shares surged higher this week.
