Argus leaves Pinterest sidelines
Argus upgrades Pinterest (NYSE:PINS) from Hold to Buy with a $40 price target, a 24% upside.
Earlier this month, Pinterest reported Q2 beats and raised its FY guidance.
PINS shares are up 1.2% pre-market to $32.60. The company has a Neutral average SA Authors’ rating.
Pinterest, Inc. is a social media web and mobile application company. It operates a software system designed to enable saving and discovery of information on the World Wide Web using images and, on a smaller scale, GIFs and videos. The site was founded by Ben Silbermann, Paul Sciarra, and Evan Sharp.
We like the Pinterest story, because it’s supported by secular user, revenue, margin, and profit growth drivers. Second quarter numbers breezed past estimates, and affirmed that this company is at the beginning of a promising multi-year growth narrative.
But the valuation underlying PINS stock already prices in a bunch of that growth.Further near-to-medium term upside in PINS stock may ultimately be limited by an overheated valuation.
Improving Fundamentals & Attractive Valuation
Twitter is implementing a series of initiatives to improve the user experience. User growth is accelerating, engagement metrics are solid and the company is producing better than expected financial performance.The stock is still attractively valued at current levels.
Twitter is an investment proposition with above-average risk levels, but the upside potential in the stock could more than compensate for such a risk in the years ahead.
Twitter is clearly moving in the right direction, but the company is still minuscule in comparison to Facebook (FB) and its 2.1 billion users across its family of services. With 139 million users, Twitter is also smaller than Snap (SNAP), which has 203 million daily active users as of the most recent quarter.
This relatively small size is both an important risk factor from a competitive point of view and also a major opportunity for the company, because it should be relatively easy for Twitter to continue accelerating user growth if management makes the right moves going forward.
Twitter stock has moved sideways over the last year, generating negative return.However, the company’s financial and business metrics have continued to improve over time.
The current stock price discounts a relatively pessimistic future. This may provide an opportunity to buy Twitter with a substantial margin of safety.The fair stock price is at least 22% higher than the current level.
Daily active users for Q2 came in at 203M, from Q1’s 190M (and up 8% Y/Y) and beating expectations for about 192M. They rose both sequentially and Y/Y in North America, Europe, and Rest of World, and on each of the iOS and Android platforms. Average Snaps per day rose to more than 3.5B.Revenues rose 48% to $388M, and the company trimmed its operating loss to $305M from a year-ago loss of $358M.
Net loss improved accordingly, by $98M to a loss of $255M. EBITDA improved by $90M to -$79M.Operating cash flow improved by $104M to -$96M; free cash flow improved by $131M to -$103M. For Q3, it’s guiding to revenue of $410M-$435M (above expectations for $400.2M, and up from $298M a year ago) and EBITDA of -$85M to -$60M, vs. last year’s -$138M.
Might Be One Of The Top Picks For The Next Year
Twitter stock has moved sideways over the last year, generating negative return.
However, the company’s financial and business metrics have continued to improve over time.
The current stock price discounts a relatively pessimistic future. This may provide an opportunity to buy Twitter with a substantial margin of safety.
The fair stock price is at least 22% higher than the current level.
7/5/2019 ~ 6 Month
Snap has gained 200% off the lows due to nothing more than a positive indication on user trends.
The average analyst is still neutral on the stock despite several headline-grabbing bull calls.
The stock has a stretched valuation compared to the peer group and is likely to return to a group multiple of 6x EV/S.
Snap still needs to prove the company is on a profitable path to even warrant the peer multiple.
Despite some positive signs, Snap (SNAP) hasn’t done anything to change the actual financial trajectory of their business. The stock market has given the company and founding CEO Even Spiegel some incredible respect
Blue Horseshoe Loves Pinterest…Breaking $30 This Week
Baird (Outperform rating) says that “a few high-end estimates” skewed consensus for the quarter and praises PINS’ ongoing strength in U.S. ad growth and early signs of international traction.
Nomura (Buy): “Our estimates change only slightly, and we remain confident in our longer term thesis that Pinterest will be a much larger company over time as MAUs continue to ramp and the monetization gap continues to close.”
Credit Suisse (Neutral) says international MAUs and ARPUs fell short of the firm’s expectations but notes that the international sales ramp is just starting and expansion to new content verticals will likely bring on more advertisers.
Loop Capital analyst Alan Gould reiterated his upbeat view of Twitter Inc. shares (TWTR) on Friday, a day after the stock dropped on concerns about second-half comparisons and spending plans (http://www.marketwatch.com/story/analyst-now-seems-to-be-an-especially-opportune-time-to-sell-twitter-2019-06-13). “We do not view 2H comps as difficult or expectations aggressive,” Gould wrote. “We think user growth headwinds from health initiatives are softening as Twitter makes progress in identifying and deactivating suspicious accounts.”
He said that improved platform health can be a “growth driver” for Twitter, while the company faces several intriguing “enTacala Ingagement drivers” next year, including the U.S. presidential election and the Olympics in Tokyo. “While we think Twitter is not particularly event-dependent, we cannot ignore the 2020 calendar,” Gould wrote. He’s also upbeat about direct-response advertising, which could improve Twitter’s monetization strategy given that the ad format is a small part of revenue, especially relative to peers. Twitter shares are near flat in Friday trading. They’ve gained 26% so far this year, as the S&P 500 has risen 15%.
The Bite-Sized Battle Royale Game is Available Now on Snapchat’s Multiplayer Gaming Platform
SAN FRANCISCO–(BUSINESS WIRE)–Jun. 5, 2019– Zynga Inc. (Nasdaq: ZNGA), a global leader in interactive entertainment, today announced the launch of its fast-paced battle royale game, Tiny Royale™, exclusively on Snap Inc’s (NYSE: SNAP) new real-time multiplayer gaming platform, Snap Games.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190605005048/en/
Tiny Royale™ is a top-down multiplayer shooter that reinvents the battle royale experience for the Snapchat platform. Tiny Royale™ lets players choose custom characters and squad up with friends or battle solo for quick two-minute rounds to loot and shoot their way to victory. Up to 30 players can battle at a time, forming squads of up to four friends. As players progress they can unlock characters and collect weapons and health packs while the map shrinks during the match until only one player, or team, remains.
“We are thrilled to be one of the first companies to launch a gaming experience on Snapchat,” said Bernard Kim, President of Publishing at Zynga. “Game developers rarely get the opportunity to create an entirely new experience on an emerging platform so our team was excited to remix the battle royale genre into a fast-paced game designed to rock on Snap Games.”
Zynga is a global leader in interactive entertainment with a mission to connect the world through games. To date, more than one billion people have played Zynga’s franchises including CSR Racing™, Empires & Puzzles™, Merge Dragons!™, Words With Friends™ and Zynga Poker™. Zynga’s games are available in more than 150 countries and are playable across social platforms and mobile devices worldwide. Founded in 2007, the company is headquartered in San Francisco with locations in the U.S., Canada, U.K., Ireland, India, Turkey and Finland. For more information, visit www.zynga.com or follow Zynga on Twitter and Facebook.
Snap Inc. is a camera company. We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate. We contribute to human progress by empowering people to express themselves, live in the moment, learn about the world, and have fun together. For more information, visit snap.com.