Report by Two Rivers Analytics

Two Rivers has recreated the Beneish model showing the highest potential manipulators and highlighting stocks such as QXO (due to M&A-driven sales spikes for AI supply chain plans), Joby Aviation (high growth amid declining margins), Rivian (rising accruals suggesting expense capitalisation), Alpha Metallurgical Resources (falling gross margins) and Pinterest (rising balance sheet accruals and sales growth). The model's inputs are similar to some that Two Rivers use in their own Stock at Risk's Earnings Quality model - albeit with some additional proprietary “secret sauce”.

Communications

Report by Paragon Intel

CEO Bill Ready underwhelms against heightened expectations - Paragon Intel’s thesis is that Ready struggles with monetisation and that while they expect him to drive an increase in velocity of product development, he will be unable to fundamentally alter PINS growth trajectory because the company's desire to become a shopping hub is due to its business model needing that to happen vs. minimal demand from online shoppers. Paragon expects Ready will grow MAUs 4-6% and ad load per hour 3-5%, but fail to move the needle on user engagement, which will grow just 0-2%. As a result, ARPU per MAU will grow 5-10% annually to reach just $7.01-7.70 in 2024.

Communications

Report by Abacus Research

All about the margins - companies that have started on the path to margin expansion will be a leading theme in the market over the next few years. So, why would investors be interested in PINS now? 1) There has been a stabilising of MAUs over last two quarters and ARPU is growing again. 2) The company is under-monetised and as the current investment period rolls off, the operating leverage in the model will become apparent. Long term, EBITDA margins can move above the previous high of 31%. 3) Comps get easy soon and the structural tailwind remains. 70% upside.

Report by Abacus Research

Short term pain, long term gain - three ideas where negative short term fundamentals are obscuring long term attractive businesses...

CoStar (CSGP) - No competition, plus headroom to increase prices. 2022 EBITDA margins will be ~27% vs. the 40%+ that the business should do as growth matures.
Etsy (ETSY) - Scaled, capital light, low SBC, and management team with a good history of execution. Take rates will rise longer term, thus revenue can compound faster than GMS.
Pinterest (PINS) - Not all users are equal; core users will be sticky and engaged. Worst case scenario the stock is worth ~$25, but in this scenario Abacus are ~50% below the street for EBITDA.

Communications

Report by Abacus Research

Early in its pivot towards monetisation, clear upside to ARPU - short-term cliff fears (growth slowdown) are overblown. The pandemic has allowed PINS to broaden its user base and verticals, which combined with investments into monetisation tools along with the expansion of advertising budgets into more niche social media will lead to an acceleration in monetisation of the platform. Estimates 30% revenue growth and 40-50% EPS growth for the next three years. TP $101 (35% upside).

Report by 280First

280first is a technology powered service that rapidly extracts actionable insights from 10-Q / 10-K text discussions through quantitative and qualitative inputs. Recent alerts include:

PINS - user engagement concerns? Added a reference to its Q1 10Q re. ‘new content and new forms of content that may not have as much relevancy as prior content…Pinner engagement may decline...’
POOL - tough times ahead? No mention of ‘expectations to gain market share…’ that was present in its 2020 10K.
PBH - management increasingly bullish / shareholders to be rewarded? Removed the risk factor re. ‘no intention of paying dividends…’