Pinterest Episode 2: Results Release
05 February 2021
There is a lot of buzz about the US indices posting all-time highs these days. But given the level of dispersion, it seems safer to me to analyze the lines one by one to get an idea of what's in the valuations.
I go back to Pinterest (as a reminder I choose this example because it is the "best pick" of the US site the Motley Fool for 2021). And so far it's up +21% year to date so they're right. We'll do the math on December 31.
Pinterest has just published its 4th quarter results and shows a sales growth of +71% and, for the first time, quite substantial operating profits ($200 Million). That's pretty good. But it's going to get complicated quickly in the coming quarters:
1. Pinterest experienced a strong growth in sales from the 3rd quarter. So it's going to be harder for it to hold its level of growth when it starts to compare to that high base.
2. On the earnings side, if I remove the one-time expenses in the quarter, costs were only up 8% in Q4. That's not much and probably not enough compared to sales at +71%. We saw the same story with Facebook, which subsequently had to increase its expenses significantly to catch up.
3. Finally, there's still the question of user growth - one of Pinterest's main drivers. In my January 28 post, I gave the evolution over the last two years:
Number of US users (in millions/month) per quarter
- 2019
- Q1 : 85 millions
- Q2: 85 million
- Q3: 87 million
- Q4: 88 million
- 2020
- Q1: 90 million
- Q2: 96 million
- Q3: 98 million
- Q4: answer on February 4 ...
The answer is 98 million. Zero growth. Pinterest has taken over the US market. That engine has shut down. Pinterest still has the time each user spends in front of their screen, but when the pandemic is over and we can start going out again, that might drop off a lot. The end of the year promises to be interesting for this issue.
As of tonight, Pinterest is valued at $49.9 Billion for a revenue of $1.7 Billion and an operating loss of $140M in 2020.
Have a good week,
Charles
PS : Good news for the fund, TF1 announced this morning good results for the 4th quarter. For the whole year, TF1 has held up well with revenues down only 11%. This allows them to announce a dividend of 0.45 EUR for 2020, which represents a yield of 7.2% on our entry price.
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