Pinterest (NYSE: PINS) stock has been hit hard over the past 12 months. The PINS share price is down 55% and its most recent earnings report missed expectations. But is there still a case for investing in PINS stock?
What is Pinterest?
Pinterest is a visual scrapbooking site that allows users to create themed mood boards. The company’s search engine allows users to find inspiration for their lives, including recipes, style, fashion, home inspiration, DIY, and much more. It showcases images, videos, product ideas, and suggestions.
Pinterest’s visual machine learning recommendations are based on the pinner’s tastes and interests.
The company was formerly known as Cold Brew Labs Inc. and changed its name to Pinterest, Inc. in April 2012. Pinterest is headquartered in San Francisco, California.
How Does Pinterest Make Money?
Pinterest took its time in monetizing the site, preferring to build a userbase first. It now makes money from advertisements and targeted pins. Pinterest’s promoted pins are adverts that look very similar to user-generated pins.
Last April Pinterest launched a creator fund to encourage creatives to make content for the platform. Initially, its focus is on the growth and success of underrepresented creators: people of color, people with disabilities and members of the LGBTQ+ community.
When did Pinterest IPO?
Pinterest went public via IPO in 2019. Its IPO price was $19 a share and it raised $1.4bn for a wider market valuation of $12.7bn. Today the company has a $17bn market cap.
PINS Stock Financials
P/BV: 5.49
P/S: 6.34
P/E: 79.84
Pinterest does not offer shareholders a dividend.
Pinterest Q2 2022 Highlights:
Revenue: $665.9m (up 9% Y/Y)
US & Canada Revenue: $542m (up 7% Y/Y)
International Revenue: $124m (up 18% Y/Y)
Global monthly active users (MAU): 433 million (down 5% Y/Y)
Net loss: $43.1m (From profit of $69.4m)
Cash on the balance sheet: $1.6bn
Guidance and Projections
Pinterest currently expects third quarter revenue to grow by mid-single digits on a year-over-year percentage basis due to slightly greater foreign exchange headwinds than in Q2. Additionally, operating expenses are anticipated to grow by a low double digit percent figure quarter-over-quarter.
Across the full year the business anticipates operating expenses will grow in the range of 35-40% year over year.
PINS Growth Potential
The good news for PINS stock investors is that change appears to be afoot at the company. It has brought in Bill Ready as its new CEO, who served as President of Commerce at Alphabet’s (NASDAQ: GOOG) Google.
The new hire is appropriate given the company’s repositioning towards e-commerce. With people using the platform to ‘pin’ products and ideas which they are interested in, Pinterest has the capability to tailor ads or promoted pins to users’ likes and dislikes.
The company’s Chief Revenue Officer Bill Watkins told AdExchanger in March that the business is developing into “a personalized shopping destination with more ways for brands to tap into trends and creators and develop meaningful connections with our high-intent users”.
Risks to Investing in PINS
We’re living through an inflationary period with Federal rate rises on the cards. This does not create bullish sentiment for high-growth tech stocks.
The time at home during COVID-19 propelled stocks like Pinterest as people flocked online to start new hobbies and plan their home renovations. Now that the world is returning to normal Pinterest appears to be seeing less interest in its platform, with monthly active user numbers declining.
There are many apps competing for user attention, particularly TikTok and Meta Platforms’ (NASDAQ: META) Instagram. With less users turning to Pinterest and advertising spend already under pressure from the inflationary environment, the company could see revenues suffer as major companies see less and less appeal in advertising to its shrinking crowd of users.
Is PINS a Good Investment?
The good thing about Pinterest is that it still has lots of room to grow its revenue. It is continuing its international expansion and increasing its ad capabilities. It’s also pursuing various e-commerce ideas.
The company will be hoping that these e-commerce ideas enhance its appeal to advertisers as revenue growth has slowed and user numbers are down since last year.
Given the company’s low share price, which is currently down near the $25 mark compared to highs of around $85 in early 2021, a return to form could be very profitable for PINS investors.
However, social media and e-commerce are both sectors with significant competition. Investors will be hoping that Pinterest’s unique offering and new ideas can lead the company back to accelerating growth.
The 33 analysts listed by Wall Street Journal have a consensus Hold rating for the stock, with an average target price of $25.22, compared to its price at the time of writing of $24.59.
Article updated 14 September 2022.
