Pinterest shares rise after posting impressive user growth

What happened

Actions of Pinterest (NYSE: PINS) They are closing July on a high note. The company reported results for the second quarter of 2020 that show an increase in monthly active users (MAU), and investors are delighted. As of 11:30 am EDT on Friday, shares were up 31%.

Perhaps even more encouraging than its growth at MAU is Pinterest’s current revenue growth. In the first 29 days of July, revenue increased 50% over the same period in 2019.

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Image source: Getty Images.

And that

Global MAUs for Pinterest increased 39% from last year and now total 416 million. It was not only an acceleration of 30% of the global growth of MAU that it registered in the second quarter of 2019, but also an acceleration of the growth of 26% that it registered in the last quarter. It seems that as people stay home more because of the COVID-19 pandemic, more are choosing Pinterest to pass the time. That is good.

However, Pinterest’s revenue increased just 4% year-over-year. The company only managed to generate $ 272 million from its more than 400 million users, as its average revenue per user (ARPU) plunged 21% to just $ 0.70.

Pinterest’s bottom line in accordance with Generally Accepted Accounting Principles (GAAP) improved greatly from last year. However, the company still recorded a net loss of $ 101 million. Additionally, his adjusted net loss actually worsened: $ 38 million, compared to a loss of $ 25 million last year.

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Image source: Getty Images.

Now what

On the surface, these numbers don’t seem to correspond with the Pinterest shares going up today. Who wants to buy a growth stock with only 4% revenue growth and an increasing loss? But I think investors are right to be excited about the company’s results.

Pinterest is complicated. First, its US user ARPU fell 11% year-over-year to $ 2.50 as advertisers temporarily cut their budgets. Second, the company has only just begun to monetize international users, and the international ARPU is only $ 0.14. But international users increased 49% over last year.

Pinterest had a double hit for the quarter. It received a revenue hit with its most profitable user base. And its less profitable user base grew substantially. But a growing user base is one of the most important parts of a long-term investment thesis for Pinterest. Therefore, its 39% growth in MAU is a good thing.

Also, the fall of ARPU for Pinterest may be temporary. Revenue has improved every month since April, and July revenue has increased 50%. This is in part because advertisers resumed their spending. But this is also because other social media platforms are being boycotted, and Pinterest is considered a safer alternative.

Pinterest management expects third-quarter revenue to increase 30% year-over-year, reflecting a slowdown from July growth. But its perception as a safe and positive social media platform is a good thing in the long run.