Should Investors Buy the Post-Earnings Dip in Pinterest (PINS) Stock?

Zacks

Despite exceeding Q3 top and bottom line expectations, weaker revenue guidance led to Pinterest PINS stock falling over -15% last Friday.

While the visual recommendations provider didn’t receive a post-earnings spike like other social media stocks such as Meta Platforms META and Snap SNAP, investors may wonder if the selloff in PINS is overdone.

Pinterest Q3 Results

Reporting Q3 results after market hours last Thursday, Pinterest’s quarterly EPS of $0.40 was above the Zacks Consensus of $0.34 and soared 43% from $0.28 a share in the prior-year quarter. This came on sales of $898.37 million which edged Q3 estimates of $897.07 million and increased 17% from $763.2 million a year ago.

Notably, Pinterest has exceeded earnings expectations in each of its last four quarterly reports posting an average EPS surprise of 17%. Pinterest has beaten top line estimates in three of the last four quarters with an average sales surprise of 1.45%.

Pinterest Outlook & Guidance

Although Pinterest’s financial results were favorable, Q4 revenue guidance of $1.12-$1.45 billion came in below many analysts' estimates with the current Zacks Consensus calling for sales of $1.15 billion or 17% growth (Current Qtr below).

Based on Zacks estimates, Pinterest’s total sales are projected to increase 19% in fiscal 2024 and are forecasted to expand another 17% in FY25 to $4.25 billion. Even better, annual earnings are expected to soar 32% this year and are slated to climb another 20% in FY25 to $1.73 per share.

Increased spending to build out a suite of artificial intelligence automation tools played a part in Pinterest’s weaker-than-expected guidance along with lower demand for its Food and Beverage segment which includes recipes, meal planning ideas, and other culinary trends.

Tracking PINS Stock Performance

Pinterest stock is down -17% this year with PINS seeing a modest rebound in this morning’s trading session. Like Snap which is down more than -20% year to date, Pinterest has vastly underperformed the broader indexes and Meta’s +64%.

Since going public in April of 2019, Pinterest stock is still up +24% to top Snap’s +4% during this period. Still, this has noticeably lagged the benchmark S&P 500 and the Nasdaq which are up over +100% while Meta shares have skyrocketed more than +200%.

Pinterest Balance Sheet & Valuation

Trading around $30, Pinterest stock is more reasonably valued after its recent selloff at 20.3X forward earnings. This is well below Snap’s 50X forward earnings multiple and a slight discount to the benchmark’s 24.4X and Meta’s 26.1X.

Amid increased spending on AI, Pinterest’s balance sheet is reassuring with $2.44 billion in cash & equivalents at the end of Q3 2024. Furthermore, Pinterest has $3.49 billion in total assets which is nicely above its total liabilities of $597 million.

Bottom Line

Pinterest stock currently lands a Zacks Rank #3 (Hold). Pinterest’s revenue guidance for Q4 may have been underwhelming, but PINS could reward investors from current levels especially those that commit to long-term positions. To that point, Pinterest’s push into AI could pay off by increasing the company’s operating efficiency with some analyst pointing to higher return on ad spend (ROAS) specifically.

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The Week Kamala Harris Lost (Nov 4-8), These Large Cap Stocks Lost Big

Benzinga

When Kamala Harris lost the 2024 U.S. election last week, these ten large-cap stocks were the worst performers.

Moderna, Inc. shares dipped 12.53% last week despite a third-quarter earnings beat due to a weak vaccine demand slowdown. Several analysts lowered their price forecast on the stock.
Honda Motor Company, Ltd. stock tumbled 11.46% on a decline in the first-half profit and reduced annual profit forecast.
Akamai Technologies, Inc. shares declined 10.67% after the company revised its FY24 guidance.
Advanced Drainage Systems, Inc. stock fell 10.53% after it reported worse-than-expected second-quarter results and cut its FY25 net sales outlook.
AstraZeneca PLC shares decreased 9.72% following a report suggesting that the company’s insurance fraud involved senior executives in China.
Pinterest, Inc. stock was down 9.60% after the company reported third-quarter results, and several analysts cut the price forecast on the stock.
MercadoLibre, Inc. shares fell 9.29% after it reported third-quarter financial results.
First Solar, Inc. stock declined 8.64%, probably due to Donald Trump’s presidential election victory. Investors may be assessing Trump’s policies regarding solar and renewable energy.
POSCO HOLDINGS INC. shares were down 8.42%.
Floor & Decor Holdings, Inc. stock fell 8.22%.

Also Read:

Donald Trump Victory Week (Nov 4-8): These Large Cap Stocks Were Biggest Gainers

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Deutsche Bank Adjusts Pinterest Price Target to $38 From $43, Maintains Buy Rating

MT Newswires

-1.55%

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Cisco Set to Report Q1 Earnings: Buy, Sell or Hold CSCO Stock?

Zacks

Cisco Systems CSCO is set to release its first-quarter fiscal 2025 results on Nov. 13.

The company anticipates first-quarter fiscal 2025 revenues between $13.65 billion and $13.85 billion. Non-GAAP earnings are expected between 86 and 88 cents per share.

The Zacks Consensus Estimate for revenues is pegged at $13.76 billion, indicating a decline of 6.17% from the year-ago quarter’s reported figure. The consensus mark for earnings has been steady at 87 cents per share in the past 30 days, suggesting a year-over-year decline of 21.62%.

CSCO’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 4.93%.

Cisco Systems, Inc. Price and EPS Surprise

Cisco Systems, Inc. price-eps-surprise | Cisco Systems, Inc. Quote

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Let’s see how things are shaping up prior to this announcement.

Key Factors to Note for CSCO’s Q1 Earnings

Cisco has been suffering from sluggish networking sales, primarily due to lackluster demand from telecommunication and cable services providers, as well as stiff competition. Excess inventory with customers has dragged down growth in the recent past.

In the fourth quarter of fiscal 2024, Cisco reported revenues of $13.64 billion, which declined 10.3% year over year, primarily due to a 15.4% decline in product revenues, which accounted for 72.3% of total revenues.

The Zacks Consensus Estimate for fiscal first-quarter Networking revenues is currently pegged at $6.909 billion, indicating 21.7% year over year.

The consensus mark for Collaboration revenues is pegged at $1.065 billion, indicating a 4.7% decline on a year-over-year basis.

However, Cisco is benefiting from strong security growth, driven by robust demand for solutions like XDR, Secure Access and Multicloud Defense suites.

The Zacks Consensus Estimate for fiscal first-quarter Security revenues is currently pegged at $1.816 billion.

CSCO Shares Underperform Sector, Beat Industry

Cisco shares have increased 14.9% year to date (YTD), underperforming the Zacks Computer & Technology sector’s appreciation of 30.4% but outperforming the Zacks Computer Networking industry’s return of 14.2%.

Year-to-Date Performance Chart

However, Cisco stock is not so cheap, as the Value Score of C suggests a stretched valuation at this moment.

In terms of the forward 12-month Price/Sales ratio, CSCO is trading at 4.12, higher than the industry’s 3.58.

Price/Sales Ratio (F12M)

Cisco’s Prospects Ride on an Innovative Portfolio

The increase in AI-related workload presents a strong growth opportunity for Cisco, thanks to an innovative portfolio. The total growth opportunity is expected to be $950 billion, with current markets expected to witness a CAGR of 6% and expansion markets likely to see a CAGR of 16% between 2025 and 2027.

Cisco’s aggressive investments in AI, cloud, and cyber security are noteworthy. It currently has more than $1 billion in AI orders from hyperscalers, with more than $1 billion in orders in the pipeline for fiscal 2025.

The Security segment is particularly noteworthy, with solutions like XDR, Secure Access and Multicloud Defense suites that are winning customers. Current markets are expected to witness a CAGR of 8%, and expansion markets are likely to see a CAGR of 14% between 2025 and 2027. The Splunk acquisition is expected to further boost CSCO’s prospects in the domain, with addressable markets worth $118 billion.

In the infrastructure domain, Cisco’s addressable market is expected to be $221 billion. CSCO has been benefiting from the growing use of AI and cloud, with the ongoing digital transformation happening at enterprises.

Recovery in Networking demand bodes well for Cisco's long term prospects. Its switching, routing, security, and observability are enabling customers to automate network operations with cutting-edge innovations like AI-powered robotics and unmatched supply-chain visibility. Investment in AI operations and autonomous networks by service providers is helping customers monetize B2B offerings.

Strong Partner Base Drives CSCO’s Prospects

Cisco’s rich partner base, which includes the likes of Meta Platforms META, Microsoft, NVIDIA NVDA, Lenovo, and AT&T T, deserves attention.

The Cisco-NVIDIA partnership has introduced the Cisco Nexus HyperFabric AI cluster solution, a new end-to-end infrastructure designed to scale generative AI workloads efficiently.

Cisco is collaborating with AT&T to introduce a seamless digital buying experience for businesses, offering 5G Fixed Wireless Access through the Meraki MG52 and MG52E gateways.

Cisco’s Silicon One continues to gain momentum. Meta Platforms is planning to deploy the Cisco 8501, which combines the power of the Cisco Silicon One G200 and a Cisco-designed and validated hardware system.

It is launching two new solutions based on Cisco Silicon One G200 — the Cisco 8122-64EH/EHF and the Cisco Nexus 9364E-SG2 — which support AI and machine learning buildouts across enterprise datacenters and hyperscalers.

Conclusion

Cisco’s near-term results are expected to suffer from sluggishness in the networking business.

However, an expanding portfolio, a growing footprint in the cybersecurity domain and a strong partner base are key catalysts that can help CSCO shares rebound in fiscal 2025.

Cisco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Reddit Stock Surges 167% Year to Date: Should You Buy the Stock?

Zacks

Reddit RDDT shares have surged 167.3% in the year-to-date period compared with the broader Zacks Computer & Technology sector’s appreciation of 30%.

RDDT shares have also outperformed the Zacks Internet Software industry and its peer Snap SNAP over the same time frame.

While Snap shares have plummeted 29% year to date, the industry has appreciated 29.8%.

Reddit’s robust stock price performance has been driven by its impressive third-quarter 2024 results.

YTD Performance

RDDT Shares Rides on Strong Q3 Earnings

Reddit’s total revenues grew 68% year over year to $348.4 million. This was driven primarily by a 56% year-over-year increase in advertising revenues, which accounted for $315.1 million. Increased ad impressions, more efficient ad load, and the expansion of conversation placement ads contributed to this growth.

The increase in ad impressions and the expansion of conversation placement ads helped drive engagement, as evidenced by a 40% year-over-year increase in conversation pageviews.

In the third quarter of 2024, Reddit enhanced its ad products, including conversation ads and tools like auto bidding and CAPI (Conversions API), which drove higher conversion rates. The ad business also benefited from strong performance in various sectors, including auto, consumer goods, and pharmaceuticals.

As a result of this enhanced ad performance, Reddit saw a 47% year-over-year increase in daily active users (DAUs), reaching over 97 million DAUs and surpassing 100 million DAUs for the first time during the third quarter.

Expanding International footprint has been noteworthy. During the third quarter, International DAUs grew 44% year over year, with a notable 53% increase in focus markets like France, India, and the Philippines. Reddit’s expansion into new languages, including Spanish, Portuguese, Italian, and German, through machine translation helped attract more global users.

Expanding Clientele Aids RDDT’s Prospects

Expanding clientele has also been a major growth drive for RDDT’s success. In the third quarter, Reddit expanded its data licensing business, securing a key partnership with Meltwater. This deal allows Meltwater to access Reddit’s content for brand insights and trend monitoring, positioning Reddit as a key player in the data licensing space.

Reddit is also leveraging its extensive content to enhance search and AI capabilities, forming partnerships with companies such as Alphabet GOOGL and OpenAI.

Reddit’s partnership with Google boosts content discovery and community engagement by providing access to Reddit’s Data API. This enhances Google’s products and supports AI advancements, benefiting both companies and reinforcing Reddit’s position as a key player in the tech industry.

Reddit’s partnership with OpenAI enhances user engagement by integrating Reddit content into ChatGPT and other AI products. This collaboration also enables Reddit to introduce AI-powered features for users and moderators, improving the platform’s overall experience and competitiveness.

In June, RDDT expanded its partnership with Sprinklr CXM, integrating Reddit’s Data API and Ads API to enhance customer insights and advertising approaches.

The collaboration allows Sprinklr users to leverage real-time Reddit conversations and ad solutions for improved brand engagement and Return on Investment.

RDDT Shares Trade at a Premium

We point out that RDDT stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of the trailing 12-month Price/Book ratio, RDDT is trading at 11.97X, higher than its median of 5.26X and the broader Zacks Computer & Technology sector’s 10.69X.

Price/Book Ratio (TTM)

RDDT Earnings Estimates Show Upward Movement

For the fourth quarter of 2024, RDDT expects revenues between $385 million and $400 million, which indicates growth of 54%-60% (57% at the mid-point).

For the fourth quarter, the Zacks Consensus Estimate for revenues is pegged at $399.59 million.

The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 19 cents per share, which has increased 5.33% in the past 30 days.

Reddit Inc. Price and Consensus

Reddit Inc. price-consensus-chart | Reddit Inc. Quote

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion

We believe RDDT’s strong user growth, enhanced ad product offerings and partnerships are driving continuous top-line growth and enhancing its growth prospects.

RRDT stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of B, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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