Pinterest’s Revenue Disappoints, Network Effect Improvement Confirms Our Optimism; FVE Down to $36

While Pinterest’s fourth-quarter results included a slowdown in revenue growth, mainly due to economic uncertainty and currency headwinds (like its peers), we were again impressed with the increase in users and monetization. The expansion of the user base supports our narrow moat rating, based on the network effect. We think the firm’s various cost-control moves and investments in its ad offerings have positioned it to experience strong operating leverage as revenue growth strengthens throughout 2023 and 2024. Management’s first-quarter revenue guidance implies full-year growth below our expectation as it believes that the macro uncertainty could linger. We have lowered our projections cutting our fair value estimate to $36 per share from $43. While the stock has reacted negatively to the fourth-quarter results, we still view this name as attractive.