On February 7, Pinterest's shares surged by 20% following the announcement of its first-quarter forecast, which indicated that its AI-powered tools would drive advertising spending on its image-sharing platform.
Pinterest has been focusing on direct response ads, tailored to prompt specific actions such as app downloads or website visits. Their investments in AI tools, like the Performance+ suite for enhancing ad targeting through automation, have been instrumental. CEO Bill Ready highlighted that advertisers using these tools now require 50% fewer inputs to set up a campaign.
Analyst Mark Shmulik from Bernstein noted, If you're a smaller ad platform, the less time and more automated you can make it for the advertisers, the easier it is to get them to try you out, expressing confidence in Pinterest's sustainable progress.
The company also thrived in the fourth quarter, with robust advertising performance in retail, technology, and financial services sectors offsetting the weakness in marketing expenditure from the food and beverage industry.
Following its latest earnings report, 27 brokerages increased their price target on Pinterest, potentially boosting its market value by over $4 billion. Pinterest currently holds a market valuation of $22.70 billion.
Notably, Pinterest's stock has historically shown volatile reactions post-earnings reports. While it dipped 14% after a lackluster holiday quarter, it soared by 21% after strong first-quarter results in April last year.
Pinterest's first-quarter revenue projection of $837 million to $852 million surpassed analysts' average forecast of $832.8 million. Similarly, its adjusted core earnings’ outlook of $155 million to $170 million exceeded analysts' expectations.
In the fourth quarter, Pinterest slightly outperformed estimates with revenue reaching $1.15 billion, while its global monthly active users totaled 553 million.
Comparatively, Pinterest trades at 17.88 times its projected earnings for the next 12 months, in contrast to Meta at 27.37 times and Snap at 25.40 times.