Shares of visual discovery social commerce platform
Pinterest (NASDAQ: PINS) are on a tear continuing to hit new all-time highs and outperforming the benchmark
S&P 500 index (NYSEARCA: SPY). The stock delivered a rope-a-dope amidst a weak Q2 2020 earnings release by pulling full-year 2020 guidance and then providing blowout Q3 2020 “estimates”. While advertising softened during the pandemic peak, Pinterest was able to accelerate e-commerce growth on its social platform thanks to integrating
Shopify (NASDAQ: SHOP) carts. This changes the dynamics transforming Pinterest from a visual search engine into a hybrid version of
Etsy (NASDAQ: ETSY),
Facebook (NASDAQ: FB) and
Alphabet (NASDAQ: GOOGL) on a smaller scale. Risk tolerant investors can look for opportunistic pullback entries.
Q2 FY 2020 Earnings Release
On July 31, 2020, Pinterest released its fiscal second-quarter 2020 results for the quarter ending June 2020. The Company reported an earnings-per-share (EPS) loss of (-$0.07) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.13), beating estimates by $0.13. Revenues rose 4.2% year-over-year (YoY) to $272.3 million beating analyst estimates of $254.80 million. Total daily video views grew over 150% YoY, which include both organic and paid. Merchant catalog uploads grew over 350% from Q1 to Q2. The Company added new built-in features including the Shop tab which streamlines the steps to shop from boards.
A Respite From Politics
Advertising softened during the April pandemic peak but has been recovering sequentially since May with economic restarts and lifting of isolation restrictions. “Performance oriented medium sized advertisers were a key driver in Q2.” According to Pinterest CFO Todd Morgenfield. He also played down the surge from advertiser boycotts of competing for social media platforms and attributes the July spike in new advertisers and spend to their technology investments. Morgenfield notes that Pinterest provides a respite from politics as users come to the platform to get away from “contention political news”.
Pandemic Driven Growth
Pinterest has seen a dynamics change in its consumer behavior driven by the stay-at-home trend as they have become more actively engaged buyers. The true transformation into a social commerce platform was accelerated from the pandemic. The Company implemented sophisticated machine learning and computer vision technology to optimize matching “the right products to inspiring themes.”. For advertisers, the implementation of auto bid tools to optimize Cost per Click (CPC) resulting in growing 80% of their CPC revenue through auto bid. Morgenfield illustrated an ROI example with advertiser Arm & Hammer baking soda for a home science project campaign for kids. They were able to get 77% more efficient CPCs on 23% high click through rates.
Non-Guidance Estimates
Pinterest pulled a quirky move by pulling guidance but then providing cryptic estimates (guidance) for Q3. Due to COVID-19 uncertainties, Pinterest didn’t provide adjusted EBITDA or revenue guidance for the full-year 2020. However, the Company proceeded to provide “estimated” revenues for the month of July to grow by 50% YoY and expects Q3 revenues to grow by 30% YoY compared to consensus analyst estimates of 5% YoY revenue growth. Rope a dope? This non-guidance caused shares to spike over 25%. With shares still accelerating at lofty levels, it’s prudent to wait for opportunistic pullbacks that could trigger from a sell-the-news reaction on Q3 earnings due out in late October since the bar has been set high.
PINS Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a more precision view of the landscape for PINS stock. The weekly rifle chart has been uptrending since the pup breakout driven by its Q2 earnings reaction. The weekly upper Bollinger Bands (BBs) target the $47.72 Fibonacci (fib) level. The weekly rifle chart triggered a market structure low (MSL) buy above $15.58 in April. The weekly 5-period moving average (MA) is rising at $37.82 as the stochastic tries to coil back up off the 80-band. The daily stochastic has squeezed through the 80-band with a rising 5-period MA support at $42.28. Shares are too lofty to chase. Rather than playing musical chairs, prudent investors should wait for opportunistic pullback levels at the $39.43 daily 15-period MA, $37.23 weekly 5-period MA/fib, $34.57 fib and $32.39 weekly 15-period MA/fib. The upside trajectories sit at the $48.72 to $53.74 range. This range may hit into earnings or afterwards if the Company can hop over the high bar set for the upcoming Q3 results. If shares run up into the earnings release, then look for the usual sell the new reaction.
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