Pinterest soars as Q3 results and outlook trounce expectations on return of brand advertising

Shares of picture sharing site Pinterest jumped by almost third in late trading after the company this afternoon reported third-quarter revenue and profit that easily surpassed Wall Street’s expectations, and forecast this quarter’s results much higher as well.

The company confirmed it is seeing a brand advertising resurgence that helped Snap in a big way last quarter.

CFO Scott Morgenfeld, in prepared remarks, told analysts on tonight’s conference call that, “We’ve seen a major impact just around brands, CPG [consumer packaged goods] advertisers and brand advertisers returning to the platform after a pause in Q2 and the return of retail, especially the larger omni-channel retailers that had paused in Q2.”

Revenue in the three months ended in September rose 58%, year over year, to $442.6 million, yielding EPS of 13 cents. That was better than the average estimate of sell-side analysts of $386 million and 3 cents per share. 

For the current quarter, the company sees revenue rising another 60%, year over year, for $638 million, which would be well ahead of consensus for $552 million.

Analysts had speculated in the wake of Snap’s results that both Snap and Pinterest are benefitting from a revival in brand advertising after a deep pause during the pandemic.

On the call tonight, Morgenfeld said the company had seen some benefit among brands that moved away from social media, an allusion to the boycotts of Facebook by advertisers during the quarter. Morgenfeld said it was unclear whether benefits from that would continue this quarter.

The second unknown is the tailwind we’ve experienced from the advertiser boycott of social media that began in July. Along the end, this group of advertisers accelerated their spend on Pinterest in Q3. On the other hand, the attractiveness of a positive brand-safe consumer platform may wane somewhat after the U.S. election cycle is over in November. So some of that spend may weigh in too. 

Asked about the outlook for 60% growth this quarter, Morgenfeld said there is some uncertainty about both brand spending and about holiday season celebrations.

“We’re seeing a lot of the same drivers in Q4 that we saw in Q3,” said Morgenfeld, in answer to an analyst’s questions. 

He added that the appeal of Pinterest as “brand safe,” meaning, inoffensive to advertisers, may or may not last past the U.S. president election next week. 

This brand safety narrative has continued to be — we talked about it on the last earnings call, we didn’t really know if it was going to be a July phenomenon only or if it were going to persist. And if it persisted, would it persist past the election. It’s persisted, and it seems to be something that’s important to advertisers, but we’ll see post-election how it plays out.

Celebration of holidays is a factor that can help or hurt business about which there is limited visibility, he said:

But those risks that impact seasonal moments, how shopping behavior changes, how people celebrate those moments, how advertisers respond to them, whether advertising around an election that maybe quite a new cycle here in the next few weeks, how that plays out — those are just uncertainties for us right now.

Pinterest stock is up 29% in late trading at $63.05.

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