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Editor's Note: Below is Hedgeye Communications analyst Andrew Freedman's analysis on his short Pinterest (PINS) call, which is down over -8% today (1/4/2022). Since going short on 7/14/2021, the stock is down over -52%. Excerpts from Freedman's original analysis, along with his October 2021 update, are below. Andrew sent out updated analysis to his Communications Pro subscribers Sunday night (1/2/2022). You can read his note in full by signing up for his research HERE. |
FROM FREEDMAN'S PINS NOTE on 1/2/2022
The mobile app data suggests engagement headwinds continued in Q4 (see chart below). As a result, we see downside risk to both Monthly Active Users (MAU) and revenue estimates in 4Q21 and 1H22.
In a more bearish scenario, we could see the stock trade down to $25-$30/share (5.5x to 6.5x - lower '23 Sales / discounted) on another MAU miss and cautious Q1 guidance fanning concerns over a difficult revenue comparison in 2Q22.
However, we are 1-2 quarters away from a potential…
Get Andrew's Comms Pro for his updated outlook & valuation, positioning, and key data drivers & catalysts.
FROM FREEDMAN'S Updated analysis (10/25/2021)
From 10/25/2021: We are moving Pinterest (PINS) from the short bench to an active short. Pinterest is more performance-based and commerce-focused, lags behind on the ad-tech side, lacks scale in users/time spent, and is probably taking it on the chin from iOS14.5 changes, supply chain/product availability issues – and they also took market share last year coming out of FB boycott.
Meanwhile, the user/engagement metrics continue to look weak and we believe PINS disproportionately benefited from the DIY trends of last year. From an ad-tech perspective, we are also comparing against the launch of auto-bid rollout that boosted revenue. Meanwhile, in the constant battle for the incremental ad $$$, we suspect Pinterest is facing competitive pressure from Amazon and Google as they look to aggressively scale shoppable ad-formats (Walmart also goes live with their DSP 4Q21). Of course, Facebook also has growing ambitions in shopping with Instagram. We took a closer look at the composition of the PINS advertiser base in our internet themes presentation.
Meanwhile, we still face increasingly difficult comparisons through 2Q22, which include comparing against record amounts of stimulus that boosted commerce/direct-response trends. With the recent string of M&A rumors, we have to be mindful that management/board are willing sellers. However, fundamentals continue to deteriorate and growth is slowing. Therefore, it is likely potential buyers wait until the iOS 14.5 dust settles before making another offer. If we are right in our fundamental outlook, then potential buyers can probably wait a couple of quarters and get a better price.
FROM FREEDMAN'S ORIGINAL SHORT CALL (7/14/2021)
We moved Pinterest (PINS) from the long bench to the short bench. We have been highlighting the slowdown in mobile user data throughout Q2, and it doesn’t appear to be getting any better to start Q3. We have seen a notable divergence in mobile app download and usage trends at PINS compared to SNAP/TWTR/FB. We came into the year thinking that PINS would be more negatively exposed to a reopening given it is more of a content/discovery platform than a true social platform. In Q2 Pinterest management said:
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“Since Q2 2020, we have noted the strong correlation between lockdowns and engagement on Pinterest. We believe that lockdowns probably pulled forward some user growth during 2020, particularly in the US where our service has been available longer. Starting in mid-March, the easing of pandemic restrictions slowed US Monthly Active User (MAU) growth and lowered engagement year over year as people spent less time online. In Q1, we saw good retention of the MAUs we gained during 2020, but we still don’t know if or how long this retention will last. Our understanding of future engagement levels is similarly limited.” |
Our recent checks on the brand/agency side have come back more mixed on PINS in the short term.
We would note that PINS has the most difficult growth comparison of the group in 3Q21 as they compare against the launch of auto-bid launch in July 2020 and took market share as a result of the FB boycott.
