Pinterest Stock Bubbling as Earnings Loom

Pinterest reports earnings after the close on Oct. 27

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Pinterest, Inc. (NYSE:PINS) stock was in focus yesterday, after Credit Suisse slashed its price target on the social media company by $20 to $62 from $82. The analyst in coverage cited a slowdown of user activity on the platform, which specializes in the sharing of projects and various decorative ideas. Today though, PINS is up 3.4% to trade at $55.40, at last check. 

Earnings for Pinterest are due out on October 27 after the market closes. The company has beat earnings expectations on all four of its most recent earnings reports. However, that doesn't tell the entire story of the stock's post-earnings performance. PINS suffered post-earnings bear gaps of 18.2% and 14.5%, respectively, after their July and April quarterly reports. Overall, the stock has averaged a post-earnings move of 17.8% after the last eight reports, regardless of direction.

Pinterest stock has taken a 15% haircut in 2021, languishing under $60 since the aforementioned late July post-earnings bear gap. The technical struggles are reflected in amongst the analyst community, where 10 of the 17 in coverage maintain tepid "hold" ratings. 

Fundamentally speaking, Pinterest stock has strong potential as a growth play despite its sky-high price-earnings ratio of 212.66. The social media brand’s trailing 12-month revenues have increased 33% since fiscal 2020 and are up 375% since fiscal 2017. In addition, Pinterest's trailing 12-month net income has increased by roughly $290 million since fiscal 2020, going from $128 million in net losses to $161 million in net profits. More importantly, Pinterest stock has a forward price-earnings ratio of 40.82, which is significantly more attractive than PINS' current price-earnings ratio and indicates a massive, expected increase in earnings. PINS also has an excellent balance sheet, with $2.14 billion in cash and $121.6 million in total debt, giving Pinterest the resources and freedom to continue exploring growth opportunities.

If options traders are so inclined, PINS' Schaeffer's Volatility Scorecard (SVS) comes in at a relatively high 94 (out of 100). In other words, the security has exceeded options traders' volatility expectations in the last year.

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