Pinterest Inc (NYSE:PINS) shares fell around 8.3% after it reported second quarter earnings that fell short of Wall Street expectations, but Wedbush analysts remain bullish on the social media platform, suggesting investors buy the dip.
For Q2, Pinterest report adjusted earnings per share (EPS) of $0.33, short of the expected $0.35.
Revenue was up 17% year-over-year to $998 million, above analyst estimates of $975 million.
Monthly active users (MAU) grew 11% year-over-year to an all-time high of 578 million, driven largely by Gen Z users who now make up over half the user base. User growth appears to be stalling in the US and Canada, with user numbers flat quarter-over-quarter at 102 million.
The company also reported a 25% year-over-year drop in ad pricing caused by an increase in users from international markets where ad rates are lower.
Wedbush analysts welcomed the revenue beat, at the high end of management’s guide of 12% to 15% year-over-year, and adjusted EBITDA of $251 million, about $18 million ahead of the Street consensus.
“Importantly, revenue growth of 17% year-over-year in the quarter gives us greater conviction in the company’s ability to deliver growth within the range of management’s 3 to 5 year targets, supported by their ability to scale ad load while balancing engagement and healthy levels of MAU growth,” they wrote.
They see the pullback in Pinterest’s shares post-earnings as unwarranted and recommended investors buy the dip.
“In our view, it is primarily driven by elevated investor sentiment leading into the print due to the strong results from other digital advertising peers,” they wrote.
However, they did note that Pinterest’s Q3 outlook reflects some conservatism. The company guided growth of 15% to 17%, ahead of Street estimates by 170 basis points at the midpoint.
“We think the outlook for Q3 reflects some level of conservatism given management has a history of achieving the high end of, or outperforming, its guidance for several consecutive quarters and revenue growth in H2 will recognize a greater benefit from the lapping of weakness in consumer packaged goods ad spending last year,” they wrote.
“Importantly, we believe consensus estimates still do not appropriately capture potential upside from more recent initiatives to drive monetization and engagement.”
Wedbush repeated its ‘Outperform’ rating on Pinterest and upped its price target to $44 from $42.
“Shares are trading for 15.4x our revised 2026 adjusted EBITDA estimate after hours, and the risk/reward is compelling in our view for a platform that still has considerable monetization potential ahead,” they concluded.