Pinterest (NYSE: PINS) stock has been hit hard over the past six months. The PINS share price is down 55% but its recent earnings report was upbeat. Is now the time to invest in PINS?
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 pinners 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 Financial Overview and Metrics
P/BV: 5.7
P/S: 8
P/E: 64
Pinterest does not offer shareholders a dividend.
Pinterest Q4 2021 Highlights:
Revenue: $846.7m (up 20% Y/Y)
US Revenue: $648m (up 11% Y/Y)
International Revenue: $199m (up 61% Y/Y)
Gross margin: 83%
Net margin: 21%
Global monthly active users (MAU): 431 million (down 6% Y/Y)
Free Cash Flow: $743m
Cash on the balance sheet: $2.48bn
Debt: None
Q1 2022 Projections:
Revenue Guidance: “High teens Y/Y”
Analyst Consensus Revenue Estimate: $572m
Analyst Consensus EPS Estimate: $0.14
PINS Stock: $34 Price Target from Stifel Nicolaus
Mark Kelley, a research analyst at Stifel Nicolaus, reiterated his January price target of $34 per share on 4 February, maintaining a Hold rating on PINS stock.
Unfortunately, Since 4 February, 18 FactSet analysts have revised EPS estimates downward suggesting a trend that earnings may be -45.07% lower than the general consensus.
On 7 February, the Pinterest stock price closed -70.3% off its 52-week high versus the subsector average change of -39.7%.
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 may see less interest in its platform.
In November Google made an algorithm change that may impact Pinterest’s search volume.
There are many apps competing for user attention, particularly TikTok and Instagram.
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.
As far as social media companies go Pinterest promotes positivity and wellbeing. It appears to be less toxic than many of its peers. The consumer intent to buy on Pinterest is also much higher than on other sites, which makes advertising lucrative.
While it’s great to see revenue growth, monthly active users must grow too. The company does have ways to make this happen but how effective they are remains to be seen.
A bump in MAUs to 436.8 million on 1 February gives investors hope.
If Pinterest can continue to grow both users and revenues it may be considered a bargain at today’s price. But as there are no guarantees, this makes PINS a speculative buy.