The stock has stabilized, though, heading into tonight's report, now vacillating within a $28-30 range. This stock action is constructive and healthy, in our view, since the initial wave of momentum-based selling from IPO flippers has expired. Therefore, the risk of a "sell-the-news" reaction, even on a strong report, has been abated.
Furthermore, with the pull-back, the valuation has become a little more palatable, but, it is still pretty rich with a 1-forward P/S of about 10x.
As for the quarter, PINS already provided some preliminary Q1 results in its IPO prospectus. Specifically, it estimated revenue at $198.9-$201.9 mln, representing yr/yr growth of 51-54%. Analysts are expecting revenue to come in at $200.6 mln with the company reporting a loss per share of ($0.11).
Unlike many tech IPOs, its revenue growth rates have remained quite steady. Over the prior four quarters, revenue growth has swung between a 54-64% range.
Driving Q1, revenue growth was driven by a combination of monthly average user (MAU) and average revenue per user (ARPU) growth. On the former, MAUs grew 22% yr/yr to 291 mln. And, on the former, ARPU improved to $0.72-$0.73, equating to a yr/yr improvement of 25%.
Since PINS is already reaching about 80% of its core target market in the U.S. (namely, women ages 18-64), it has turned its focus towards expanding its user base internationally. This was a significant factor in its Q1 MAU growth, as well as its growth in subsequent quarters. To put that into better perspective, its 4Q18, 3Q17, and 217 MAU growth in the U.S was 3%, 8%, and 6%, respectively, compared to 32%, 33%, and 37%, in its international markets.
The improvement in ARPU, meanwhile, is due to higher monetization of its user base, mainly from an increase in the number of ads delivered. This was driven by a combination of more advertisers on the platform, and, more demand from existing advertisers.
However, going forward, PINS says that its ARPU could be negatively impacted as its international business becomes a larger piece of the total pie. That's primarily because it has a learning curve to progress though as it has less experience with international advertising markets.
Since PINS provided preliminary Q1 results, most of the mystery has already been taken out of the quarterly report. Therefore, most investors will be focused on its outlook and guidance. In order to meet the street's expectations, it will need to guide for Q2 loss per share of ($0.07) and revenue of $235.2 mln. And, for FY19, estimates stand at a loss per share of ($0.15) on revenue of $1.09 bln.
To conclude, the first quarterly report out of the chute for a recent IPO is always a key event. In this case, its guidance is what will ultimately drive the stock action following the report. Its growth rates have remained remarkably steady and the company has a better hold on its expenses than most tech IPOs. The company is also making a concerted push to expand overseas. These factors could lead to a solid outlook for PINS, and, a subsequent push higher for the stock.