Pinterest Shares Surge as AI-Powered Tools Boost Ad Revenue

Pinterest's stock (PINS) witnessed a 20% surge on Friday after the company announced a better-than-anticipated revenue forecast for the first quarter. This positive outlook suggests that Pinterest's artificial intelligence (AI)-driven tools are attracting increased ad spending on the image-sharing platform.

AI Tools Enhance Ad Performance

Pinterest has invested heavily in AI tools, such as its Performance+ suite, which automates ad targeting and improves their relevance. This has led to a significant improvement in campaign creation efficiency, with advertisers requiring 50% fewer inputs.

"For smaller ad platforms, simplifying the process and reducing the time required for advertisers makes it easier for them to experiment with the platform," said Mark Shmulik, an analyst at Bernstein.

Strong Q4 Revenue Driven by Retail and Tech

Pinterest also posted record revenue in the fourth quarter, supported by robust advertising revenue from retail, technology, and financial services sectors. This growth offset the decline in marketing spending from food and beverage companies.

Positive Analyst Sentiment

Following Pinterest's earnings report, at least 27 brokerages raised their price targets. If the gains hold, the company's market value could increase by over $4 billion, bringing its total market valuation to approximately $26.70 billion.

Historical Stock Performance

Pinterest's stock is known for its volatility after earnings announcements. While it declined by 14% in November after the company's weak holiday quarter forecast, it surged by 21% a day after reporting its first quarter results in April 2022.

Key Financial Metrics

For the first quarter, Pinterest expects revenue in the range of $837 million to $852 million, surpassing analysts' estimates of $832.8 million. Its adjusted core earnings forecast of $155 million to $170 million is also higher than analyst expectations.

Valuations

Currently, Pinterest trades at 17.88 times its estimated earnings for the next 12 months, compared to 27.37 times for Meta and 25.40 times for Snap.