Pinterest Stock Pops on Earnin

Pinterest (PINS, Financial) is the 14th largest social media network in the world and has a platform designed to inspire, engage and enable a visual shopping experience. It was one of the main beneficiaries of the “stay at home” environment at the start of the pandemic, when people searched for home decor and baking ideas on the platform.

The company recently caught my eye when it released its Q1 2022 results. Revenue jumped, earnings jumped, and so did their share price, showing a slight uptick after more than a year of corrections. from the highs of the Covid bubble.

In 2021, the stock may have suffered from high inflation, rising interest rates and a correction in growth stocks, but I think after the earnings and revenue beats in first quarter, the stock could be ready to rally. Here’s why.

business model

Pinterest is the 14th largest social network in the world and has 433 million monthly active users according to its first quarter results, which is very similar to Twitter (TWTR, Financial). The company saw a surge in users during the 2020 shutdowns, but MAUs were down 9% year over year in the last quarter.

The Pinterest platform caters to a predominantly female population (60%) who seeks inspiration and ideas in areas such as home decor, baking, travel, fashion, art and even more. To do this, users search the platform and “pin” different images or video pins to their own boards or others. Personally, I think the platform is best characterized as a “visual search engine” as opposed to a social network.

Pinterest is also a place of positivity with 8 out of 10 users saying the platform makes them feel positive. Eighty-five percent of Pinners also use Pinterest to plan new projects, and the platform typically caters to those early in their buying journey.

Pinterest recently launched an Augmented Reality (AR) Try-ON feature for interior design, which allows users to use the Pinterest Camera to see a graphical representation of furniture in their own living space, using the power of augmented reality. The Try-ON function is also useful for purchasing cosmetics like lipstick, eye shadow, etc. According to Pinterest, users are five times more likely to buy something if they can try it in AR. Searches for AR Try-ON Pins grew 126% in 2021. Seventy-five percent of weekly Pinterest users say they “always shop” or “love shopping,” making the platform attractive to advertisers. Downloads from Pinterest’s catalog doubled globally in 2021, and in international markets they grew by more than 400%.

In the first quarter, the company pointed out that its Pins video idea had grown 15 times year over year and that it is looking to further accelerate that with the acquisition of Vochi, a video editing app.

They also launched the Pinterest Shopping API, which allows product detail pages to include real-time product pricing and availability.

Pinterest is working on “Your Shop”, a personalized shopping page powered by a “taste-driven” algorithm.

Additionally, they have a WooCommerce partnership which allows for a more seamless checkout experience. Personally, I think these are all smart moves on the part of the platform and could significantly increase their average revenue per user.

Earnings win

In Pinterest’s first-quarter earnings results for 2022, they said they beat revenue and EPS estimates even though user growth declined. Revenue was $575 million versus $573 million expected, while earnings per share were 10 cents on an adjusted basis versus 4 cents expected.

Global active users fell 9% to 433 million from the same period a year ago. The drop in users is not a surprise as the company experienced phenomenal growth in 2020. The worldwide average revenue per user (ARPU) was $1.33, up 28% from the previous year and above Wall Street estimates of $1.31. The company’s GAAP net losses narrowed to $5 million in the first quarter from $22 million in the year-ago quarter. Adjusted EBITDA was $77 million.

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Evaluation

In terms of valuation, the GF Value chart, a unique intrinsic value estimate from GuruFocus, rates the stock as significantly undervalued after the major pullback.

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The company’s price-to-sales ratio is also the lowest since the pandemic low in March 2020 at just 5.3.

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The stock trades at one of the lowest price-to-sales ratios compared to other social media companies such as Snap (INSTANTANEOUS, financial), meta (Facebook, financial) and Twitter. Only Meta is lower, but you could say there’s a good reason for that.

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Overall, I think the Pinterest platform is unique in terms of style, and I personally consider them to be in their own “visual search engine” niche, giving this platform major potential to expand their e-commerce offer for advertisers. could lead to a significant increase in revenue per user and even a possible acquisition from a struggling tech giant. This company is definitely one to watch.

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