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Shares in post-sharing company Pinterest rose Thursday after a third-quarter earnings release revealed the company’s better-than-expected results this summer from advertisers boycotting billionaire-owned social media juggernauts Facebook and Twitter were increased.

Employees from Online Image Board Pinterest Inc, including CEO Ben Silbermann (center), call … [+] The bell opened on the New York Stock Exchange on April 18, 2019 as the company went public.

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Key factors

While the broader stock market struggled to recover from a massive sell-off this week, Pinterest stocks rose 30% on Thursday after a bullish third-quarter earnings report that beat Wall Street expectations. Pinterest stock is up nearly 40% this year.

The San Francisco-based company had third-quarter revenue of $ 443 million – the highest revenue ever, 58% year over year and 15% more than analysts expected. That increase helped reduce the company’s net loss of $ 94 million for the quarter by 25% year over year, resulting in adjusted earnings per share that also exceeded expectations.

Despite not naming Facebook or Twitter, Pinterest chief financial officer Todd Morgenfeld said the company’s third-quarter revenue received an unexpected boost from ad boycotts from other social media that began in July, causing them to accelerate their spending on Pinterest .

User growth reached new highs both domestically and internationally. By the end of the reporting period, the company had 442 million monthly active users, 37% more than last year.

Pinterest has a solid average buy recommendation and a target price of $ 45.26 based on 24 analysts who issue such guidance for the company. That’s more than 50% above the current price level of around USD 65.

Following the bullish third quarter earnings release, JPMorgan’s Doug Anmuth and MKM Partners’ Rohit Kulkarni raised Pinterest to target prices of $ 75 and $ 66, respectively on Thursday. Kulkarni said the company’s ability to monetize user growth is “clearly sustainable”.

Key background

Earlier this summer, corporate heavyweights, along with more than 1,000 companies, decided to boycott advertising on social media giant Facebook starting in July, calling the movement #StopHateForProfit. Organized by civil rights groups like the Anti-Defamation League and the National Association for the Advancement of Colored People, the campaign urged Facebook to investigate and end algorithmic prejudice and hate speech on its platform. The movement attracted attendees such as McDonald’s, Starbucks, Disney, and Coca Cola – and ultimately went beyond the originally scheduled one-month timeframe. It also hit other platforms like Twitter, LinkedIn, and YouTube owned by Alphabet.

Crucial quote

“We saw much greater demand for our advertising services in the third quarter than expected,” Morgenfeld said in a conference call after the profit on Wednesday, referring to the increased spending by the group of advertisers who boycotted other social media – a trend he may have not expressed being sustainable. “Pinners are likely to be planning the holidays differently, and it’s hard to know how marketers will respond to these changes. [An] What is unknown is the tailwind that we experienced from the boycott of social media by advertisers that began in July. The appeal of a positive, brand-safe consumer platform could wane a little after the end of the US election cycle in November, so some of that spending may wear off as well. “

What to look for

A number of big tech companies – including Facebook, Twitter, Amazon, Apple, and the Google parent alphabet – will be reporting profits after the market closes Thursday to shed light on a sector that outperformed during the pandemic, as well as uncertainties ahead of the election. Wall Street analysts are optimistic. Like Pinterest, Facebook has seen a surge in retail and e-commerce spending, according to Corinne Demadis of New York social media advertising firm Smartly.io and Pivotal Research analyst Michael Levine said ad spend last week should bode well for Facebook despite the boycott, as it did for Snap and Pinterest in their earnings reports.

further reading

Stocks just had their worst day in four months – election could make matters worse (Forbes)

Big Tech Could Get Into Big Trouble Next Year – Even As Amazon, Apple, And Facebook Prepare For Another Monster Neighborhood (Forbes)

Facebook ad boycott extends beyond July: “Everyone agrees that Facebook needs to change” (Forbes)