Pinterest stock has become one of the most closely watched names among investors recently, but the attention comes as analysts have been trimming their profit forecasts for the digital pinboard and shopping company. Over the past month, Pinterest shares have slipped 3.6%, a smaller decline than the 5.4% drop in the S&P 500 composite but a better outcome than the 14.1% loss in the Internet – Software industry where Pinterest is classified.
The central issue for investors is whether the stock can regain momentum given that earnings estimates have been moving lower. Sell-side analysts covering Pinterest have reduced their consensus estimates over the last 30 days, a trend that carries weight because research has long shown a strong link between estimate revisions and near-term stock price moves.
Earnings Forecasts Point Lower
For the current quarter, Pinterest is expected to earn $0.80 per share, which would represent a 19.4% increase from the same period a year earlier. However, the Zacks Consensus Estimate has fallen 5.3% over the past month. The consensus estimate for the current fiscal year stands at $1.99 per share, implying 24.4% year-over-year growth, but that figure has also been cut, down 4.2% over the last 30 days.
Looking further out, the consensus estimate for the next fiscal year is $2.25 per share, a 12.7% increase from what Pinterest is expected to report a year ago. That projection has declined 4.4% over the past month. The pattern of downward revisions has contributed to a Zacks Rank #4 (Sell) for Pinterest, a rating that suggests the stock may lag the broader market in the near term.
Revenue Growth Still Expected
While earnings estimates have been reduced, revenue forecasts remain positive. The consensus sales estimate for the current quarter is $1.46 billion, up 10.8% year over year. For the current fiscal year, analysts expect $4.86 billion in revenue, a 15% increase, and for the next fiscal year, they project $5.45 billion, up 12.2%.
In the most recently reported quarter, Pinterest generated $1.17 billion in revenue, an 11.9% year-over-year increase. Earnings per share for that period came in at $0.46, compared with $0.38 a year earlier. The revenue figure fell 2.26% short of the Zacks Consensus Estimate of $1.2 billion, while EPS missed by 8%. Over the last four quarters, Pinterest has exceeded consensus EPS estimates three times and topped revenue estimates twice.
Valuation Offers Some Support
On valuation, Pinterest receives a B grade from the Zacks Value Style Score, which evaluates both traditional and unconventional valuation metrics. That grade indicates the stock is trading at a discount to its peers. The score can help investors assess whether a stock is overvalued, fairly valued, or temporarily undervalued, though it does not by itself predict future price direction.
For investors weighing the market buzz around Pinterest, the combination of falling earnings estimates and a Zacks Rank #4 suggests caution may be warranted. The stock has outperformed the broader market and its industry over the past month, but the downward revision trend in profit forecasts is a factor that could weigh on near-term performance.
