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Below is a complimentary research note from Communications analyst Andrew Freedman. If you are an institutional investor interested in accessing our research email sales@hedgeye.com |
Pinterest (PINS) reported 4Q19 results last night that beat consensus and our estimates. We decided to move PINS to the long bench (our equivalent of "selling some") after a +35% move in the stock off the December low and into a catalyst where we had less conviction in the numbers.
While our initial modeling assumptions calling for upside to domestic ARPU growth (click here for note) ended up being correct, many of the monetization challenges we flagged based on our checks were corroborated by management's commentary.
At $27/share the stock trading at 11.5x 2020 EV/Sales. We believe this valuation reflects the bull case and the view that management's 2020 guidance for 33% sales growth is conservative. As a result, we would NOT be chasing PINS here and would be selling into strength.
We are keeping PINS on the long bench for now as the stock has the potential to run here. However, we will consider pivoting short once the dust settles and have better line of sight into where estimates, expectations, and catalysts shakeout.
We will have a more detailed breakdown of the quarter for Institutional subscribers later.
