Pinterest And Snap Show V-Shaped Recovery; Cloudflare Guns For Zero-Trust

2020 earnings from ad-tech stocks have shown us that digital advertising has rebounded sharply from the pandemic recession lows. Pinterest’s (PINS) growth rate dropped to 4% YoY in Q2 but has since rebounded to +77% in Q4. SNAP’s growth rate bottomed at 17% in Q2 and has recovered to +62% in Q4. 

In total, global digital advertising spend grew less than 5% in 2020 but is expected to accelerate with 17% YoY growth in 2021 as we head into a higher GDP environment.      

Global digital ad spend now makes up 52% of all ad spend, the first year it has eclipsed over 50% share. Over the next 4 years, global digital ad spend is expected to grow 61% from its current total and will exceed 60% of all advertising dollars. The industry growth we are expecting to see will provide a powerful tailwind for digital ad stocks. Pinterest and Snap have proven to be two of the industry’s leaders, with both companies announcing record results in Q4. 

Pinterest

Pinterest reported Q4 results on February 5th, beating estimates on both the top and bottom lines. Revenue of $706M (+77% YoY) came in 9% above the consensus projection of $647M. Adjusted EPS of $0.43 exceeded the street estimate of $0.33 while adjusted EBITDA of $299M far outpaced estimates calling for $226M. 

The company announced that Global Monthly Active Users (MAUs) grew 37% YoY to 459M vs. 450M consensus, US MAUs were 98mm vs. 97M consensus, and International MAUs were 361M vs 360M consensus. 

Management also indicated that it is expecting revenue to grow in the low 70% range YoY for the March quarter.

In its Q4 earnings call, Pinterest CFO, Todd Morgenfeld, attributed the strong Q4 to the investments the company has made in technology and the expansion of their sales coverage:

“Over the last year, we’ve invested in our ability to better deliver returns [through] accountable performance advertising, including scaling, conversion optimization, ads, shopping, ads, and building improved automation to help advertisers of all sizes more easily onboard and realize the value of being on Pinterest…We also expanded our sales team in Western Europe to monetize our engagement there.” 

One of the standouts from the company’s Q4 results is the international growth they saw. Pinterest grew international revenue 146% YoY, international MAUs 79% YoY, and international ARPU 67% YoY. All three metrics represent record results for Pinterest. 

On the technology front, Pinterest has created value for advertisers through the onboarding of catalogs and automation tools to make spending on the platform easier. The investments Pinterest has made in improving their technology to deliver more value to advertisers paid off with record numbers in Q4. 

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