Pinterest Earnings: Network Effect Driving Revenue Growth and Margin Expansion

Pinterest’s network effect strengthened further during the third quarter, demonstrated by strong top- and bottom-line results on the back of user growth, better engagement, and higher monetization. The solid revenue growth created operating leverage and margin expansion, which management stated will continue, supporting our assumptions. In addition to the impressive results, some comments from the firm also confirm our belief that hesitancy on the part of advertisers is declining, which is good news for the overall advertising market. Regarding the firm’s platform specifically, more advertisers are connecting their marketing data with Pinterest, which in our view indicates confidence by the advertisers and their plans to spend more on the platform in the long run. We slightly increased our projections, which resulted in a $37 fair value estimate, up from $36.