Morningstar Equity Analyst Report | Report as of 31 Jul 2020 08:46, UTC | Page 1 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC Morningstar Pillars Analyst Quantitative Important Disclosure: Economic Moat Narrow Narrow The conduct of Morningstar’s analysts is governed by Code of Ethics/Code of Conduct Policy, Personal Security Trading Policy (or an equivalent of), Valuation QQQ Fairly Valued and Investment Research Policy. For information regarding conflicts of interest, please visit http://global.morningstar.com/equitydisclosures Uncertainty Very High High Financial Health — Moderate Pinterest Pins Successful Q2 and Guides for Strong Q3; Raising FVE to $31 Source: Morningstar Equity Research Quantitative Valuation PINS Business Strategy and Outlook pre-pandemic levels even after some of the lockdowns USAi Ali Mogharabi, Sr. Eq. Analyst, 08 July 2020 were eased. Plus, most of the users on Pinterest are Undervalued Fairly Valued Overvalued Pinterest, an online product and idea discovery company, shopping, which helps the firm’s direct-response ads is focused on carving out a piece of the global digital generate attractive returns on investment and brings more Current 5-Yr Avg Sector Country advertising space. While we don't expect Pinterest to advertisers on board. All of this clearly displays Pinterest’s Price/Quant Fair Value 0.95 — 0.84 0.83 Price/Earnings — — 15.3 20.1 displace online advertising behemoths Google and network effect moat source. Management guided for Forward P/E -1.0 — 14.6 13.9 Facebook or up-and-coming Amazon, we do expect it to third-quarter top-line growth in the mid-30s (significantly Price/Cash Flow 590.4 — 6.0 13.1 attract a small pinch of digital ad spending, which we above consensus estimates) as it expects user growth and Price/Free Cash Flow — — 15.6 19.5 estimate is an addressable market of nearly $500 billion. monetization to strengthen. We increased our projections Trailing Dividend Yield% — — 4.22 2.35 for this year and next and continue to expect GAAP Source: Morningstar Pinterest has a narrow economic moat and stable moat profitability in 2023. Adjustments to our model resulted in Bulls Say trend based on network effects and intangible assets a $31 fair value estimate, up from $27. The stock now OPinterest can increase user monetization with (data), which we think can eventually drive the company appears fairly valued as it spiked more than 30% in better shopability of the platform, from live pricing to to profitability and excess returns on invested capital. reaction to the strong second quarter and guidance. visual searches. With more than 365 million average monthly users who OPinterest’s user growth increases as its market access Pinterest with the intention of not only discovering Total revenue of $272.5 million was up 4%, driven mainly increasingly prefers platforms that place high ideas or products but also purchasing them immediately by a 39% year-over-year increase in monthly active users importance on data protection and filtering fake or in the future, we think the firm can attract more online to 416 million. Overall user monetization declined nearly news. ad dollars. In our view, Pinterest can attract various types 21% from last year mainly due to the 11% decline in of ad campaigns through the marketing funnel--from average revenue per user in the United States, compared OPinterest still has room to attract a wider base of broad exposure or awareness to targeting and actual with a 27% increase in the international markets. We users, potentially increasing the platform’s appeal to conversion. We think opportunities exist for the firm to expect user monetization to increase in U.S. during the advertisers. gradually increase its share of the U.S. digital advertising remainder of 2020, assuming improvement in the state of market, as well as grow internationally (mainly in Europe) the economy, a shift of some of the Facebook boycott ad Bears Say in terms of both users and ad dollars collected from this dollars to Pinterest (as we published in our June 29 note), OInstagram is a formidable social network that and more advertisers seeking additional platforms for audience. could poach Pinterest users as it releases its Pinterest direct-response campaigns. equivalent, Collections, and expands its visual search As a platform for content sharing, a big risk for Pinterest capabilities. is that the firm is susceptible to blame for spreading Economic Moat OPinterest cannot effectively monetize its misinformation via pins. Additionally, by having an Ali Mogharabi, Sr. Eq. Analyst, 31 July 2020 international user base after years of near ad-less international audience, Pinterest is subject to Europe's We view Pinterest as a narrow-moat firm. We believe feeds for those users. General Data Protection Regulation. Still, there has been Pinterest has displayed a network effect among its users OTight e-commerce competition could lead to a little public outcry based on how Pinterest uses pinners' and has begun to compile valuable intangible assets, or hefty spike in R&D expense that doesn’t pay off. data and whom this may be shared with. user data, both of which we think it can effectively monetize and generate return on invested capital for at Analyst Note least 10 years. Ali Mogharabi, Sr. Eq. Analyst, 31 July 2020 Pinterest's second-quarter results beat our projections Indications of the network effect and intangible asset and the FactSet consensus estimates as strong user economic moat sources include Pinterest's user growth growth during the pandemic more than offset softer user (although we expect such growth to decelerate) and monetization. The stay-at-home trend brought on by the increase in average revenue generated per user through COVID-19 pandemic continues to benefit Pinterest and its advertising. We think these trends will continue, which peers as more consumers are spending more time online. will lead to operating leverage, future profitability, and In addition, user engagement has remained above excess return on invested capital over time. We think ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 2 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC Close Competitors Currency (Mil) Market Cap TTM Sales Operating Margin TTM/PE immediately takes action or not, in our view advertisers Alphabet Inc GOOGL USD 1,047,796 166,677 21.36 33.90 still benefit as they can retarget the same users in the future, further increasing conversion rates. Advertisers Facebook Inc FB USD 669,033 73,357 36.21 28.65 could be drawn to the Pinterest platform as the number Snap Inc SNAP USD 32,925 1,924 -56.11 0.00 of users and, more important, content posted by the users Twitter Inc TWTR USD 28,812 3,480 7.62 0.00 increases. Pinterest's strategy is on the right track and there is room in the digital advertising market for Pinterest to grow and While the firm will be competing with digital advertising become profitable. In our view, while Pinterest's user giants like Google, Facebook, and more recently Amazon, count is not as impressive as that of Facebook or we believe it can attract enough advertisers or ad dollars Instagram, the understanding that it is not just another to become profitable and generate excess return on online social platform, it is not a similar passive medium, invested capital. and its users come on the platform with the purpose of finding ideas or products will help the firm attract ad Pinterest can attract various types of ad campaigns dollars. through the marketing funnel--from broad exposure or awareness to targeting and actual conversion. This is Pinterest accommodates an average of around 250 million mainly due to two things. First, pinners access the app or users, or pinners, per month who are in search of pictures website with the purpose of finding different types of or videos of various products or ideas (or discovery, as the products or ideas. Second, the likelihood that pinners' firm refers to it). Discovery items may include fashion, intentions as they save, post, and exchange pictures and products to help remodel homes, recipes, and much more. videos of various products are to make purchases, quickly Pinners may also be willing to post pictures and videos or at some point in the future, is high. Such a social about those products and ideas. Pins posted by the pinners commerce platform could help advertisers to not only can be grouped and saved on what the company calls introduce brands or new products to the nearly quarter of boards. Every user can view such user curated a billion pinners, but to also target various groups with content--the boards or the individual pins. In addition, specific products for immediate purchase on the app. based on what users may view as helpful or influencing Based on growth in user monetization, or average revenue ideas, they can follow other users or their boards. As more generated per user, it appears that Pinterest's platform is users post pins or save pins on their boards, other users attracting ad dollars. benefit as they come across more products and ideas that help answer their questions, creating a network effect. We also think Pinterest's more innovative features have While historical data is limited, we think that growth in attracted retailers and direct-to-consumer brands to Pinterest's monthly active users, from 128 million in the purchase ads on the platform. Some of those features first quarter of 2016 to 265 million in the fourth quarter include Product Pins, Shop the Look, and visual search tool of 2018, displays the network effect. Growth in pinners Lens. Product Pins are basically native ads that contain has decelerated, which is likely to continue; however, the pictures or videos of products and services with real-time monetization of Pinterest's users is expected to improve. availability and pricing updates, along with purchasing capabilities. Many retailers post those pins in order to Pinterest monetizes its users and generates revenue by make the purchase much easier for the pinners by avoiding selling ad space to advertisers. In our view, the simple the hassle of going to the retailer's website. interaction and exchange of ideas based on products and ideas among Pinners creates the word-of-mouth Shop the Look is more of a social feature as it identifies marketing, which is considered effective by advertisers. different products within pins that are for sale and users This gives Pinterest and its advertising clients a better can purchase. When a user clicks on a product in a pin, idea about user interests or tastes, which creates what Pinterest returns pictures of similar products with Pinterest refers to as the Taste Graph. Analysis of Taste information about price and availability. Graph data helps Pinterest and advertisers post more relevant and effective ads, or Promoted Pins, which may Lens, which can be combined with text search, is generate attractive conversion rates. Whether a pinner Pinterest's most innovative and interactive tool, in our ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 3 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC opinion, as it helps users focus on any product in a pin consumption-driven economy in the U.S., we expect the and asks Pinterest to conduct a visual search and bring ad dollars allocated to Pinterest to grow in the U.S. despite back pictures or videos of similar products. Some of those the firm's decelerating U.S. user count. Growth in visual search results could be purchased right away, while international users, led by Europe, will also be others could be images of similar products that Pinterest's accommodated by higher average revenue per machine learning-based visual search technology (which international user. includes image recognition) identified as relevant for the user to see or explore. Pinterest's Lens and the technology With strong top-line growth and Pinterest's network effect behind it also allow users to activate the camera on their and data economic moat sources, we expect gross margin mobile device, focus on any product around them, and and operating margin expansion during the next 10 years. conduct a visual search for similar products automatically As Pinterest enhances its ad selling system to handle more on the app. Facebook acquired a company providing transactions in real time and to make it more similar visual search technology, GrokStyle, in early programmatic, or "self-service," costs associated with ads February. Google, Amazon, and eBay are also making sold will decline and gross margins are likely to expand. investments in visual search. We assume gross margins of 73% and 78% in 2024 and 2029, respectively, higher than the 68% earned in 2019. Pinterest is also using QR codes along with its own version, referred to as Pincodes, to help consumers not With strong top-line growth and gross margin expansion, only receive more information about products while in along with the network effect moat source helping to stores but also find similar products possibly provided by generate operating leverage as revenue outpaces sales other retailers or brands. and marketing, we expect operating margin expansion to 33% by 2029 from operating losses in 2019. Fair Value & Profit Drivers Ali Mogharabi, Sr. Eq. Analyst, 31 July 2020 Risk & Uncertainty Our fair value estimate is $31 per share on a fully diluted Ali Mogharabi, Sr. Eq. Analyst, 31 July 2020 basis. This represents an enterprise value/sales multiple We assign Pinterest a very high uncertainty rating given of 8 in 2020. We have modeled 26% and 20% 5- and the company’s fierce competition in winning ad dollars 10-year compound annual growth rates for revenue, which and the possibility of a rapidly changing e-commerce and results in revenue of $3.6 billion in 2024 and $7.1 billion social media landscape that could be difficult to which to in 2029. By 2029, we estimate Pinterest will have adapt. Pinterest probably has a weaker social graph than approximately 1%-2% of the global digital advertising Facebook or Instagram, which may create some difficulty market. Overall growth in digital advertising plus the firm for it to attract significantly more ad dollars consistently. adding more advertisers and the sale of more ad inventory Advertising on social platforms is more effective if the should drive our growth estimate. recommendations, likes, comments, and other input come from trusted people. According to a survey conducted by While pinner growth will also be a driver, in our view, it Deloitte and published by eMarketer in October 2018, U.S. will be decelerating, as we don't see much upside in U.S. Internet users trust product recommendations by friends user growth, which will be offset by continuing growth and family members, who probably spend more time on internationally. We estimate that average total users will social networks like Facebook and Instagram, the most. grow to over 650 million by 2029 from 335 million in 2019, representing average annual growth of 8%. As a platform for content sharing, Pinterest is susceptible to blame for spreading misinformation via pins. For In our view, given that most Pinterest users access the instance, in February, Pinterest banned all searches app with the intention of finding various products or ideas, related to antivaccination pins in order to avoid appearing which could result in high ad conversion rates for Pinterest to promote the lifestyle choice. Vaccinations aren't the and advertisers, monetization of pinners is likely to only proactive measure Pinterest is for, however. This ban outpace user growth after the COVID-19 pandemic. We differs from those by competitors like Facebook and anticipate average annual revenue per user to increase Twitter, because it was mainly proactive against harmful at a 12% CAGR through 2029. Due to the posts, given the little-publicized dissent against the ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 4 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC antivaccination content before the ban. The ban was implemented out of Pinterest's post policy, formalized in 2013, which advocates against self-harm and health misinformation. Additionally, by having an international audience, Pinterest is subject to Europe's General Data Protection Regulation. Instapaper, a tool to save articles from external sites to read for later and formerly owned by Pinterest, was disabled for two months in 2018 in order to avoid noncompliance with GDPR, even though it had several years to adapt to the changes. Still, there has been little public outcry based on how Pinterest uses pinners' data and whom this may be shared with. Stewardship Ali Mogharabi, Sr. Eq. Analyst, 08 April 2020 We view Pinterest’s stewardship of shareholder capital as Standard. Founded in 2010 by Benjamin Silbermann, Evan Sharp, and Paul Sciarra, the company has fared well even with departure of Sciarra, the former CEO. Silbermann, a former display ad designer at Google, is the current CEO of Pinterest. Sharp is also a Silicon Valley veteran as he worked at Facebook as a product designer before helping to start Pinterest. Sharp is currently the firm’s chief design and creative officer. We think Silbermann, Sharp, and CFO/COO Todd Morgenfeld have done a fair job of expanding the monetization of the platform through wise investments in new technology, like visual search, and adding new features like live pricing. While our stewardship rating is Standard, we note that Pinterest’s dual-class share structure limits the voice of other shareholders. Pinterest has a 20-1 voting ratio between Class B and Class A common stock. Silbermann and Sharp will have some influence over Pinterest, as they are expected to maintain their combined 13%-plus of voting power after the IPO. Ultimately, investors will be only slightly dependent on the decisions made by Silbermann and Sharp and whether they will help Pinterest generate exceptional returns for shareholders. Pinterest has not made any material acquisitions, and we do not foresee the company issuing a dividend anytime soon. ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 5 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC update on its first quarter, which included revenue that Analyst Notes Archive was in line with our internal estimate and above the FactSet consensus and a higher-than-expected user count. Pinterest Ends a Successful IPO Year With a Strong Plus, because of the uncertainty brought on by COVID-19, Q4 As Users and Advertisers Jump on the Platform Pinterest withdrew its initial full-year 2020 guidance. We Ali Mogharabi, Sr. Eq. Analyst, 06 February 2020 have adjusted our projections and are maintaining our $26 Pinterest’s fourth-quarter results beat our projections and fair value estimate, which continues to represent the FactSet consensus on the top and bottom lines driven attractive upside. by strong user growth and monetization. Pinterest’s investments in not only improving the app's user interface As COVID-19 continues to spread around the world and but also creating new ad products for advertisers continue delay major events like the Olympics, we believe it will to pay off. The firm’s latest financial results display what hurt ad spending. We estimate overall ad spending will we had initially assumed, that Pinterest--a social network decline 15%-20% during 2020. Impact on digital ad company with a network effect that can attract ad spending should be less than on traditional, so we expect campaigns through the marketing funnel, from broad online ad spending to decline between 5% and 10% in exposure or awareness to targeting and conversion--will 2020 but come back with a vengeance, driven mainly by attract advertisers. Management guided for 2020 revenue economic recovery. of $1.52 billion, or 33% growth, and flat to slightly higher adjusted EBITDA margin. We do not plan to make material We think the full-year effect of the lower overall online changes to our $24 fair value estimate for Pinterest. ad spending will be partially offset by Pinterest’s strong first-quarter revenue and impressive user growth and the Total revenue increased 46% year over year to nearly $400 demographics of its users. Given the current quarantines million, driven by 26% growth in monthly active users, and lockdowns, advertising for home decor, “athleisure,” MAUs, and a 13% growth in average revenue generated and delivery services may not decline much. Plus, while per user, or ARPU. The firm’s improvement in its app companies in the travel and hospitality markets will design, more focus on video content, and the availability continue to slash ad purchases, we think Pinterest users of a lighter version of the app likely drove the increase in will keep attracting consumer-packaged goods brands, MAUs. We think the strong growth in ARPUs is mainly which are less likely to significantly cut ad spending during due to the firm’s continuing investment in enhancing its the pandemic. We estimate a 1% decline in Pinterest ad products, including data measurement and analytics, revenue in 2020, followed by a 49% increase in 2021, all of which have attracted more ad buyers. which will be driven by an increase in ad inventory and prices. As a reminder, before the coronavirus outbreak, U.S. MAU growth remained in single digits but the firm was far from maximizing user and app accelerated compared with last year. At quarter’s end, monetization, as it had not yet begun to increase its ad Pinterest’s U.S. MAU count was 88 million, up 7%. Ad loads. product enhancements helped the monetization growth in the U.S. outpace user growth significantly, as U.S. ARPU Pinterest’s Q1 Margins Pressured, but More Users increased over 26% year over year to $4. International Continue to Onboard; Maintaining $26 FVE MAU increased 35% from last year to 247 million, while Ali Mogharabi, Sr. Eq. Analyst, 05 May 2020 ARPU of those users surged 122% to $0.21. Pinterest reported mixed first quarter results with revenue exceeding our internal projection and the FactSet COVID-19 Will More Than Offset Pinterest’s Strong consensus, while profits slightly missed expectations. Q1, but Shares Remain Attractive; Maintaining FVE While the impact of COVID-19 on ad spending partially Ali Mogharabi, Sr. Eq. Analyst, 08 April 2020 offset Pinterest’s impressive quarterly user figures, the While COVID-19 has lowered ad demand and prices at firm maintained strong double-digit revenue growth, narrow-moat Pinterest (and at its social networking within the guidance range provided on April 7. In our view, peers), the firm’s network effect continues to strengthen, Pinterest’s user growth will strengthen the firm’s network which may attract advertisers back to the platform when effect moat source as it will attract more advertisers the pandemic subsides. On April 7, Pinterest provided an during an economic turnaround. We are not making any ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 6 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC significant adjustments to our revenue projections but we approaching a 4-star rating, attractive. are lowering our margin assumptions due to weakness in user monetization during the current pandemic. We are Pandemic Not as Severe on Digital Ads; Raising maintaining our $26 fair value estimate. While the stock Alphabet, Facebook, Pinterest, Snap, and Twitter had jumped more than 90% since its year-to-date lows in FVEs mid-March, it is paring some of those gains, trading 17% Ali Mogharabi, Sr. Eq. Analyst, 08 July 2020 lower in after-hours. In our view, Pinterest shares have We have increased our estimates for Alphabet, Facebook, again become attractive. Pinterest, Snap, and Twitter, as the coronavirus-related hit to digital advertising looks softer than we initially Total revenue came in at $272 million, up 35% year over anticipated. We think advertisers will continue to allocate year, driven mainly by 26% growth in monthly average more of their ad dollars toward direct-response campaigns users and a 6% increase in revenue generated per user. after the pandemic. The main beneficiary of what may While user growth stayed comparable with prior quarters, become a lasting change is likely to be Facebook. monetization decelerated significantly (compared with Investments by Pinterest and Snap to enhance their 26% in first quarter 2019). The current pandemic reduced direct-response offerings will probably partially offset the advertising demand but did attract more users to the impact of lower spending on broad-based campaigns. The platform. According to the firm, engagement among users same could be true of Twitter, but to a lesser extent. At also increased, which allowed Pinterest to sell more ad Google, we expect search to attract more advertisers, inventory but at lower prices. While overall demand from given the overall decline in ad prices. Plus, assuming no advertisers declined, advertising by consumer-packaged significant lockdowns by the second half of 2021, we goods partially offset cuts by companies in the retail, expect Google and Snap to more effectively monetize their travel, automobile, and restaurant sectors, similar to what map apps. The adjustments to our projections lift our fair we mentioned in our April 8 note. value estimates for Alphabet 9% to $1,520, Facebook 14% to $245, Pinterest 4% to $27, Snap 6% to $18, and Twitter Advertising Walkout on Facebook and Other Social 7% to $32. Media Gains Momentum; Pinterest May Benefit Ali Mogharabi, Sr. Eq. Analyst, 29 June 2020 Digital ad spending in the second half of this year is likely Over the weekend, more large brands and advertisers, to be higher than the same period of 2019. According to including Coca-Cola, Starbucks, and Unilever, announced a survey of advertisers conducted by the Interactive plans to pause or reduce ad spending on social media Advertising Bureau in mid-June, more ad buyers said they platforms (mainly Facebook and its Instagram platform) in plan to increase ad spending on social media and paid protest against the lack of controls to limit hate speech search than to not change or decrease their spending and misinformation. The movement, which began on June during the next six months compared with last year. The 17, has gained momentum, increasing the risk for firms survey also showed that the increase will likely come at such as Facebook and Twitter, while possibly creating the expense of cutting spending on traditional advertising. some opportunities for Pinterest and Alphabet. However, The survey also indicates that advertisers may increase we anticipate that most of the advertisers will return to their social media and paid search spending by at least Facebook given its more than 2.6 billion users. In the 25% and 20%, respectively, from the second half of 2019. meantime, Facebook can take steps to demonstrate it will Earlier this month, eMarketer also published its latest reduce hate speech further on the platform; although more estimates for 2020 digital ad spending, which it now content oversight could bring more regulatory risks to the believes will increase 2% year over year, well above our forefront. With the current advertiser walkout, we have initial projection in March of a 5%-10% decline. not changed fair value estimates for the social media companies under our coverage. We value Facebook, Pinterest Pins Successful Q2 and Guides for Strong Twitter, Snap, Pinterest, and Alphabet at $215, $30, $17, Q3; Raising FVE to $31 $26, and $1,400 per share, respectively. We continue to Ali Mogharabi, Sr. Eq. Analyst, 31 July 2020 view Facebook, Twitter, and Alphabet as fairly valued, Pinterest's second-quarter results beat our projections while Snap remains overvalued. The recent sell-off in the and the FactSet consensus estimates as strong user social media names has made Pinterest, which is growth during the pandemic more than offset softer user ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 7 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC monetization. The stay-at-home trend brought on by the COVID-19 pandemic continues to benefit Pinterest and its peers as more consumers are spending more time online. In addition, user engagement has remained above pre-pandemic levels even after some of the lockdowns were eased. Plus, most of the users on Pinterest are shopping, which helps the firm’s direct-response ads generate attractive returns on investment and brings more advertisers on board. All of this clearly displays Pinterest’s network effect moat source. Management guided for third-quarter top-line growth in the mid-30s (significantly above consensus estimates) as it expects user growth and monetization to strengthen. We increased our projections for this year and next and continue to expect GAAP profitability in 2023. Adjustments to our model resulted in a $31 fair value estimate, up from $27. The stock now appears fairly valued as it spiked more than 30% in reaction to the strong second quarter and guidance. Total revenue of $272.5 million was up 4%, driven mainly by a 39% year-over-year increase in monthly active users to 416 million. Overall user monetization declined nearly 21% from last year mainly due to the 11% decline in average revenue per user in the United States, compared with a 27% increase in the international markets. We expect user monetization to increase in U.S. during the remainder of 2020, assuming improvement in the state of the economy, a shift of some of the Facebook boycott ad dollars to Pinterest (as we published in our June 29 note), and more advertisers seeking additional platforms for direct-response campaigns. ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Quantitative Equity Report | Release: 31 Jul 2020, 15:46 UTC | Reporting Currency: USD | Trading Currency: USD | Exchange:XNYS Page Page 8 of1 15 of 1 Pinterest Inc PINS QQQQ 31 Jul 2020 02:00 UTC Last Close Fair ValueQ Market Cap Sector Industry Country of Domicile 30 Jul 2020 31 Jul 2020 02:00 UTC 30 Jul 2020 25.19 26.42 14,772.8 Mil i Communication Services Internet Content & USA United States Information There is no one analyst in which a Quantitative Fair Value Estimate and Quantitative Star Rating are attributed to; however, Mr. Lee Davidson, Head of Quantitative Price vs. Quantitative Fair Value Research for Morningstar, Inc., is responsible for overseeing the methodology that 2016 2017 2018 2019 2020 2021 Quantitative Fair Value Estimate supports the quantitative fair value. As an employee of Morningstar, Inc., Mr. Total Return Davidson is guided by Morningstar, Inc.’s Code of Ethics and Personal Securities Trading Policy in carrying out his responsibilities. For information regarding Conflicts Sales/Share 70 of Interests, visit http://global.morningstar.com/equitydisclosures Forecast Range Forcasted Price 56 Dividend Company Profile Split Pinterest is an online product and idea discovery platform that Momentum: Negative 42 helps users gather ideas on everything from recipes to cook to Standard Deviation: — destinations to travel to. Founded in 2010, the platform Liquidity: High 28 consists of a largely female audience, at roughly two thirds of its more than 365 million monthly active users. The company 10.10 52-Wk 36.83 generates revenue by selling digital ads and is now rolling out 14 more in-platform e-commerce features. — — — — 35.1 Total Return % — — — — 33.3 +/– Market (Morningstar US Index) — — — — — Trailing Dividend Yield % Quantitative Scores Scores — — — — — Forward Dividend Yield % All Rel Sector Rel Country Quantitative Moat Narrow 82 83 79 — — — -8.0 -10.0 Price/Earnings Valuation Fairly Valued 24 26 32 — — — 10.1 12.1 Price/Revenue Quantitative Uncertainty High 86 86 89 Morningstar RatingQ Financial Health Moderate 84 60 84 QQQQQ QQQQ QQQ PINS QQ Q USAi 2015 2016 2017 2018 2019 TTM Financials (Fiscal Year in Mil) Undervalued Fairly Valued Overvalued — — 473 756 1,143 1,213 Revenue — — — 59.9 51.2 6.1 % Change Source: Morningstar Equity Research — — -138 -75 -1,389 -1,490 Operating Income — — — — — — % Change Valuation Sector Country Current 5-Yr Avg Median Median — — -130 -63 -1,361 -1,461 Net Income Price/Quant Fair Value 0.95 — 0.84 0.83 — — -103 -60 1 25 Operating Cash Flow Price/Earnings — — 15.3 20.1 — — -41 -22 -34 -37 Capital Spending Forward P/E -1.0 — 14.6 13.9 — — -144 -83 -33 -12 Free Cash Flow Price/Cash Flow 590.4 — 6.0 13.1 — — -30.5 -10.9 -2.9 -1.0 % Sales Price/Free Cash Flow — — 15.6 19.5 — — -0.29 -0.14 -3.24 -2.51 EPS Trailing Dividend Yield % — — 4.22 2.35 — — — — — — % Change Price/Book 7.6 — 2.0 2.4 — — — — -0.10 -0.02 Free Cash Flow/Share Price/Sales 12.1 — 1.3 2.4 — — — — — — Dividends/Share — — — — 3.43 3.31 Book Value/Share Profitability Sector Country — — — — 569,904 586,456 Shares Outstanding (K) Current 5-Yr Avg Median Median Profitability Return on Equity % -224.0 — 13.0 12.9 — — — -320.6 -104.3 -224.0 Return on Equity % Return on Assets % -85.2 — 4.8 5.2 — — -11.1 -5.4 -76.8 -85.2 Return on Assets % Revenue/Employee (K) 547.0 — 685.3 325.9 — — -27.5 -8.3 -119.1 -120.5 Net Margin % — — 0.40 0.65 0.64 0.71 Asset Turnover Financial Health Sector Country Current 5-Yr Avg Median Median — — — 2.0 1.2 1.2 Financial Leverage — — 62.2 68.0 68.6 68.3 Gross Margin % Distance to Default 0.6 — 0.5 0.5 Solvency Score — — 527.0 552.4 — — -29.2 -9.9 -121.5 -122.9 Operating Margin % Assets/Equity 1.2 0.3 1.9 1.7 — — — — — — Long-Term Debt Long-Term Debt/Equity — — 0.3 0.4 — — -546 586 2,024 1,938 Total Equity — — 2.0 3.2 4.5 4.8 Fixed Asset Turns Growth Per Share Quarterly Revenue & EPS Revenue Growth Year On Year % 1-Year 3-Year 5-Year 10-Year Revenue (Mil) Mar Jun Sep Dec Total Revenue % 51.2 — — — 2020 271.9 — — — — 62.1 Operating Income % — — — — 2019 201.9 261.2 279.7 399.9 1,142.8 53.7 Earnings % — — — — 2018 131.4 161.2 190.2 273.2 755.9 47.1 46.4 Dividends % — — — — 2017 — — — — 472.9 34.7 Book Value % — — — — Earnings Per Share () Stock Total Return % -12.0 — — — 2020 -0.25 — — — — 2019 -0.08 -2.62 -0.23 -0.06 -3.24 2018 -0.12 -0.09 -0.04 0.09 -0.14 2018 2019 2020 2017 — — — — -0.29 © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and ® opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore is not an offer to buy or sell a security; are not warranted to be correct, complete or accurate; and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, ß analyses or opinions or their use. The information herein may not be reproduced, in any manner without the prior written consent of Morningstar. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 9 of 15 Research Methodology for Valuing Companies Qualitative Equity Research Overview intangible assets, switching costs, network effect, cost Our model is divided into three distinct stages: At the heart of our valuation system is a detailed projection advantage, and efficient scale. of a company's future cash flows, resulting from our Stage I: Explicit Forecast analysts' research. Analysts create custom industry and Companies with a narrow moat are those we believe In this stage, which can last five to 10 years, analysts company assumptions to feed income statement, balance are more likely than not to achieve normalized excess make full financial statement forecasts, including items sheet, and capital investment assumptions into our globally returns for at least the next 10 years. Wide-moat such as revenue, profit margins, tax rates, changes in standardized, proprietary discounted cash flow, or DCF, companies are those in which we have very high working-capital accounts, and capital spending. Based modeling templates. We use scenario analysis, in-depth confidence that excess returns will remain for 10 years, on these projections, we calculate earnings before competitive advantage analysis, and a variety of other with excess returns more likely than not to remain for at interest, after taxes, or EBI, and the net new analytical tools to augment this process. We believe this least 20 years. The longer a firm generates economic investment, or NNI, to derive our annual free cash flow bottom-up, long-term, fundamentally based approach profits, the higher its intrinsic value. We believe low- forecast. allows our analysts to focus on long-term business drivers, quality no-moat companies will see their normalized which have the greatest valuation impact, rather than short- returns gravitate toward the firm's cost of capital more Stage II: Fade term market noise. quickly than companies with moats. The second stage of our model is the period it will take the company's return on new invested capital—the Morningstar's equity research group (“we," "our") believes To assess the direction of the underlying competitive return on capital of the next dollar invested ("RONIC")— that a company's intrinsic worth results from the future advantages, analysts perform ongoing assessments of to decline (or rise) to its cost of capital. During the Stage cash flows it can generate. The Morningstar Rating for the moat trend. A firm's moat trend is positive in cases II period, we use a formula to approximate cash flows in stocks identifies stocks trading at an uncertainty-adjusted where we think its sources of competitive advantage lieu of explicitly modeling the income statement, discount or premium to their intrinsic worth—or fair value are growing stronger; stable where we don't anticipate balance sheet, and cash flow statement as we do in estimate, in Morningstar terminology. Five-star stocks sell changes to competitive advantages over the next Stage I. The length of the second stage depends on the for the biggest risk-adjusted discount to their fair values several years; or negative when we see signs of strength of the company's economic moat. We forecast whereas 1-star stocks trade at premiums to their intrinsic deterioration. this period to last anywhere from one year (for worth. companies with no economic moat) to 10–15 years or All the moat and moat trend ratings undergo periodic more (for wide-moat companies). During this period, Four key components drive the Morningstar rating: (1) our review and any changes must be approved by the cash flows are forecast using four assumptions: an assessment of the firm's economic moat, (2) our estimate of Morningstar Economic Moat Committee, comprised of average growth rate for EBI over the period, a the stock's fair value, (3) our uncertainty around that fair senior members of Morningstar's equity research normalized investment rate, average return on new value estimate and (4) the current market price. This department. invested capital, or RONIC, and the number of years process ultimately culminates in our single-point star rating. until perpetuity, when excess returns cease. The 2. Estimated Fair Value investment rate and return on new invested capital 1. Economic Moat Combining our analysts' financial forecasts with the decline until the perpetuity stage is reached. In the case The concept of an economic moat plays a vital role not firm's economic moat helps us assess how long returns of firms that do not earn their cost of capital, we only in our qualitative assessment of a firm's long-term on invested capital are likely to exceed the firm's cost of assume marginal ROICs rise to the firm's cost of capital investment potential, but also in the actual calculation capital. Returns of firms with a wide economic moat (usually attributable to less reinvestment), and we may of our fair value estimates. An economic moat is a rating are assumed to fade to the perpetuity period over truncate the second stage. structural feature that allows a firm to sustain excess a longer period of time than the returns of narrow-moat profits over a long period of time. We define excess firms, and both will fade slower than no-moat firms, Stage III: Perpetuity economic profits as returns on invested capital (or ROIC) increasing our estimate of their intrinsic value. Once a company's marginal ROIC hits its cost of capital, over and above our estimate of a firm's cost of capital, we calculate a continuing value, using a standard or weighted average cost of capital (or WACC). Without perpetuity formula. At perpetuity, we assume that any a moat, profits are more susceptible to competition. We growth or decline or investment in the business neither have identified five sources of economic moats: creates nor destroys value and that any new investment provides a return in line with estimated WACC. Morningstar Research Methodology for Valuing Companies Because a dollar earned today is worth more than a dollar earned tomorrow, we discount our projections of cash flows in stages I, II, and III to arrive at a total present value of expected future cash flows. Because we are modeling free cash flow to the firm—representing cash available to provide a return to all capital providers—we discount future cash flows using the WACC, which is a weighted average of the costs of equity, debt, and preferred stock (and any other funding sources), using expected future proportionate long-term market-value weights. ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 10 of 15 Research Methodology for Valuing Companies 3. Uncertainty Around That Fair Value Estimate Morningstar Equity Research Star Rating Methodology Morningstar's Uncertainty Rating captures a range of likely potential intrinsic values for a company and uses it to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating represents the analysts' ability to bound the estimated value of the shares in a company around the fair value estimate, based on the characteristics of the business underlying the stock, including operating and financial leverage, sales sensitivity to the overall economy, product concentration, pricing power, and other company-specific factors. Analysts consider at least two scenarios in addition to their base case: a bull case and a bear case. Assumptions are chosen such that the analyst believes there is a 25% probability that the company will perform better than the bull case, and a 25% probability that the company will perform worse than the bear case. The distance between the bull and bear cases is an important indicator of the uncertainty underlying the fair value estimate. Our recommended margin of safety widens as our uncertainty of the estimated value of the equity increases. The more uncertain we are about the estimated value of the equity, the greater the discount we require relative to our estimate of the value of the firm before we would recommend the purchase of the Morningstar Star Rating for Stocks The Morningstar Star Ratings for stocks are defined below: shares. In addition, the uncertainty rating provides Once we determine the fair value estimate of a stock, we guidance in portfolio construction based on risk compare it with the stock's current market price on a daily QQQQQ We believe appreciation beyond a fair risk- tolerance. basis, and the star rating is automatically re-calculated at adjusted return is highly likely over a multiyear time frame. the market close on every day the market on which the The current market price represents an excessively Our uncertainty ratings for our qualitative analysis are stock is listed is open. pessimistic outlook, limiting downside risk and maximizing low, medium, high, very high, and extreme. Please note, there is no predefined distribution of stars. upside potential. That is, the percentage of stocks that earn 5 stars can × Low–margin of safety for 5-star rating is a 20% discount fluctuate daily, so the star ratings, in the aggregate, can QQQQ We believe appreciation beyond a fair risk- and for 1-star rating is 25% premium. serve as a gauge of the broader market's valuation. When adjusted return is likely. × Medium–margin of safety for 5-star rating is a 30% there are many 5-star stocks, the stock market as a whole is discount and for 1-star rating is 35% premium. more undervalued, in our opinion, than when very few QQQ Indicates our belief that investors are likely to × High–margin of safety for 5-star rating is a 40% discount companies garner our highest rating. receive a fair risk-adjusted return (approximately cost of and for 1-star rating is 55% premium. equity). × Very High–margin of safety for 5-star rating is a 50% We expect that if our base-case assumptions are true the discount and for 1-star rating is 75% premium. market price will converge on our fair value estimate over QQ We believe investors are likely to receive a less than × Extreme–margin of safety for 5-star rating is a 75% time, generally within three years (although it is impossible fair risk-adjusted return. discount and for 1-star rating is 300% premium. to predict the exact time frame in which market prices may adjust). Q Indicates a high probability of undesirable risk-adjusted 4. Market Price returns from the current market price over a multiyear time The market prices used in this analysis and noted in the Our star ratings are guideposts to a broad audience and frame, based on our analysis. The market is pricing in an report come from exchange on which the stock is listed, individuals must consider their own specific investment excessively optimistic outlook, limiting upside potential and which we believe is a reliable source. goals, risk tolerance, tax situation, time horizon, income leaving the investor exposed to Capital loss. needs, and complete investment portfolio, among other For more details about our methodology, please go to factors. https://shareholders.morningstar.com. ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 11 of 15 Research Methodology for Valuing Companies Other Definitions quantitative report and the quantitative ratings, there is no Value Estimate, current market price, and the Quantitative one analyst in which a given report is attributed to; Uncertainty Rating. The rating is expressed as 1-Star, 2-Star, Last Price: Price of the stock as of the close of the market however, Mr. Lee Davidson, Head of Quantitative Research 3-Star, 4-Star, and 5-Star. of the last trading day before date of the report. for Morningstar, Inc., is responsible for overseeing the methodology that supports the quantitative equity ratings Q: the stock is overvalued with a reasonable margin of Stewardship Rating: Represents our assessment of used in this report. As an employee of Morningstar, Inc., safety. management's stewardship of shareholder capital, with Mr. Davidson is guided by Morningstar, Inc.'s Code of Ethics Log (Quant FVE/Price)<–1*Quantitative Uncertainty particular emphasis on capital allocation decisions. Analysts and Personal Securities Trading Policy in carrying out his consider companies' investment strategy and valuation, responsibilities. QQ: the stock is somewhat overvalued. financial leverage, dividend and share buyback policies, Log (Quant FVE/Price) between (–1*Quantitative execution, compensation, related party transactions, and Quantitative Equity Ratings Uncertainty, –0.5*Quantitative Uncertainty) accounting practices. Corporate governance practices are Morningstar's quantitative equity ratings consist of: only considered if they've had a demonstrated impact on (i) Quantitative Fair Value Estimate QQQ: the stock is approximately fairly valued. shareholder value. Analysts assign one of three ratings: (ii) Quantitative Star Rating Log (Quant FVE/Price) between (–0.5*Quantitative "Exemplary," "Standard," and "Poor." Analysts judge (iii) Quantitative Uncertainty Uncertainty, 0.5*Quantitative Uncertainty) stewardship from an equity holder's perspective. Ratings (iv) Quantitative Economic Moat are determined on an absolute basis. Most companies will (v) Quantitative Financial Health QQQQ: the stock is somewhat undervalued. receive a Standard rating, and this is the default rating in (collectively the "Quantitative Ratings"). Log (Quant FVE/Price) between (0.5*Quantitative the absence of evidence that managers have made Uncertainty, 1*Quantitative Uncertainty) exceptionally strong or poor capital allocation decisions. The Quantitative Ratings are calculated daily and derived from the analyst-driven ratings of a company's peers as QQQQQ: the stock is undervalued with a reasonable Quantitative Valuation: Using the below terms, intended to determined by statistical algorithms. Morningstar, Inc. margin of safety. Log (Quant FVE/Price) >1*Quantitative denote the relationship between the security's Last Price ("“Morningstar," "we," "our") calculates Quantitative Uncertainty and Morningstar's quantitative fair value estimate for that Ratings for companies whether it already provides analyst security. ratings and qualitative coverage. In some cases, the Quantitative Uncertainty: Intended to represent Quantitative Ratings may differ from the analyst ratings Morningstar's level of uncertainty about the accuracy of the × Undervalued: Last Price is below Morningstar's because a company's analyst-driven ratings can quantitative fair value estimate. Generally, the lower the quantitative fair value estimate. significantly differ from other companies in its peer group. quantitative Uncertainty, the narrower the potential range × Fairly Valued: Last Price is in line with Morningstar's of outcomes for that particular company. The rating is quantitative fair value estimate. Quantitative Fair Value Estimate: Intended to represent expressed as Low, Medium, High, Very High, and Extreme. × Overvalued: Last Price is above Morningstar's Morningstar's estimate of the per share dollar amount that quantitative fair value estimate. a company's equity is worth today. Morningstar calculates × Low: the interquartile range for possible fair values is less the quantitative fair value estimate using a statistical model than 10%. Risk Warning derived from the fair value estimate Morningstar's equity × Medium: the interquartile range for possible fair values is Please note that investments in securities are subject to analysts assign to companies. Please go to less than 15% but greater than 10%. market and other risks and there is no assurance or https://shareholders.morningstar.com for information about × High: the interquartile range for possible fair values is guarantee that the intended investment objectives will be fair value estimates Morningstar's equity analysts assign to less than 35% but greater than 15%. achieved. Past performance of a security may or may not be companies. × Very High: the interquartile range for possible fair values sustained in future and is no indication of future is less than 80% but greater than 35%. performance. A security investment return and an investor's Quantitative Economic Moat: Intended to describe the × Extreme: the interquartile range for possible fair values is principal value will fluctuate so that, when redeemed, an strength of a firm's competitive position. It is calculated greater than 80%. investor's shares may be worth more or less than their using an algorithm designed to predict the Economic Moat original cost. A security's current investment performance rating a Morningstar analyst would assign to the stock. The Quantitative Financial Health: Intended to reflect the may be lower or higher than the investment performance rating is expressed as Narrow, Wide, or None. probability that a firm will face financial distress in the near noted within the report. Morningstar's Uncertainty Rating future. The calculation uses a predictive model designed to serves as a useful data point with respect to sensitivity × Narrow: assigned when the probability of a stock anticipate when a company may default on its financial analysis of the assumptions used in our determining a fair receiving a "Wide Moat" rating by an analyst is greater obligations. The rating is expressed as Weak, Moderate, value price. than 70% but less than 99%. and Strong. × Wide: assigned when the probability of a stock receiving Quantitative Equity Reports Overview a "Wide Moat" rating by an analyst is greater than 99%. × Weak: assigned when Quantitative Financial Health <0.2 The quantitative report on equities consists of data, × None: assigned when the probability of an analyst × Moderate: assigned when Quantitative Financial Health statistics and quantitative equity ratings on equity receiving a "Wide Moat" rating by an analyst is less than is between 0.2 and 0.7 securities. Morningstar, Inc.'s quantitative equity ratings are 70%. × Strong: assigned when Quantitative Financial Health >0.7 forward looking and are generated by a statistical model that is based on Morningstar Inc.'s analyst-driven equity Quantitative Star Rating: Intended to be the summary ratings and quantitative statistics. Given the nature of the rating based on the combination of our Quantitative Fair ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 12 of 15 Research Methodology for Valuing Companies Other Definitions Last Close: Price of the stock as of the close of the market of the last trading day before date of the report. Quantitative Valuation: Using the below terms, intended to denote the relationship between the security's Last Price and Morningstar's quantitative fair value estimate for that security. × Undervalued: Last Price is below Morningstar's quantitative fair value estimate. × Fairly Valued: Last Price is in line with Morningstar's quantitative fair value estimate. × Overvalued: Last Price is above Morningstar's quantitative fair value estimate. This Report has not been made available to the issuer of the security prior to publication. Risk Warning Please note that investments in securities are subject to market and other risks and there is no assurance or guarantee that the intended investment objectives will be achieved. Past performance of a security may or may not be sustained in future and is no indication of future performance. A security investment return and an investor's principal value will fluctuate so that, when redeemed, an investor's shares may be worth more or less than their original cost. A security's current investment performance may be lower or higher than the investment performance noted within the report. The quantitative equity ratings are not statements of fact. Morningstar does not guarantee the completeness or accuracy of the assumptions or models used in determining the quantitative equity ratings. In addition, there is the risk that the price target will not be met due to such things as unforeseen changes in demand for the company's products, changes in management, technology, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, and tax rate. For investments in foreign markets there are further risks, generally based on exchange rate changes or changes in political and social conditions. A change in the fundamental factors underlying the quantitative equity ratings can mean that the valuation is subsequently no longer accurate. For more information about Morningstar's quantitative methodology, please visit http://global.morningstar.com/equitydisclosures. ? © Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Please see important disclosures at the end of this report. Morningstar Equity Analyst Report |Page 13 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC General Disclosure The analysis within this report is prepared by the person (s) noted in their capacity as an analyst for Morningstar’s equity research group. The equity research group consists of various Morningstar, Inc. subsidiaries (“Equity Research Group)”. In the United States, that subsidiary is Morningstar Research Services LLC, which is registered with and governed by the U.S. Securities and Exchange Commission. The opinions expressed within the report are given in good faith, are as of the date of the report and are subject to change without notice. Neither the analyst nor Equity Research Group commits themselves in advance to whether and in which intervals updates to the report are expected to be made. The written analysis and Morningstar Star Rating for stocks are statements the Report and are subject to change. While financial situation or particular needs of any specific of opinions; they are not statements of fact. Morningstar has obtained data, statistics and recipient. This publication is intended to provide information from sources it believes to be reliable, information to assist institutional investors in making The Equity Research Group believes its analysts make Morningstar does not perform an audit or seeks their own investment decisions, not to provide a reasonable effort to carefully research information independent verification of any of the data, statistics, investment advice to any specific investor. Therefore, contained in the analysis. 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To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Morningstar Equity Analyst Report |Page 14 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC investment decision and when deemed necessary, to currently covers and provides written analysis on seek the advice of a legal, tax, and/or accounting • Neither Morningstar, Inc. or the Equity Research please contact your local Morningstar office. In professional. 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Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Morningstar Equity Analyst Report |Page 15 of 15 Pinterest Inc PINS (XNYS) Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship QQQ 34.29 USD 31.00 USD 1.11 — 0.00 14.77 Internet Content Standard 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 31 Jul 2020 & Information 20:43, UTC 20:33, UTC SEBI or any other legal/regulatory body. Morningstar Investment Adviser India Private Limited is a wholly owned subsidiary of Morningstar Investment Management LLC. 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To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
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