How to Trade Pinterest After Blowout Earnings

Pinterest has come off all-time highs after reporting earnings. Here's how to trade it from here.
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Pinterest  (PINS) - Get Report was up about 5% and hit all-time highs on Friday after better-than-expected earnings.

Is the stock still being undervalued?

Shares were up more than 11% shortly after the open, although the stock faded from those highs pretty quickly. Given the fact that Pinterest rallied for six straight sessions ahead of earnings and climbed 20.3% in that span, perhaps bulls don’t want a huge post-earnings rally.

It might be deserved though. Earnings and revenue blew past expectations, with the latter growing 76% year over year.

The company’s adjusted EBITDA margins were quite impressive, while management called for revenue guidance in the low-70% range for next quarter, far ahead of estimates calling for growth in the mid-50% range. 

It’s possible Pinterest pulls back from here, particularly if the overall market sees some selling pressure. But given the strength of this report - and the much worse reaction to Snap  (SNAP) - Get Report after earnings - it’s clear Pinterest has momentum.

That’s the name we want to keep betting on.

Trading Pinterest

Daily chart of Pinterest stock.

Daily chart of Pinterest stock.

On the daily chart above, one can see that six-day rally I referenced, as shares hit new highs ahead of earnings. That put bulls in a tough spot before the print, but those that stuck with it are being rewarded.

Pinterest stock rallied right to the 161.8% extension from the recent pullback in January.

Fading from that level now, I’d love to see Pinterest hold up over prior uptrend resistance (blue line) and the pre-earnings high.

If it can do that and consolidate in the $80 to $87 range, I think that can allow the stock to digest enough of its gains before continuing to the upside.

It’s clear this company has momentum at its back and that momentum is carrying forward into 2021. That should keep a bid beneath the stock, helping to elevate Pinterest stock throughout the quarter.

If that’s the case and shares ultimately take out the high at $86.49, look for a move into the $90s. There it finds the two-times range extension at $91.61. Further, I don’t find Pinterest eventually hitting $100 to be all that far-fetched.

That level is both psychologically relevant, but it’s also the 261.8% extension.

On the downside, a break of the $75 to $77 zone likely puts some of its key moving averages in play, which I expect to act as support for the time being.