Is the board-based social network Pinterest as cheerful as it is cheap? One year since its IPO and we ask if Pinterest is a good investment right now?
Pinterest (NYSE: PINS) was founded in 2010 and became a public company 9 years later. One of several U.S. based social media communities, its users find and pin GIFS, pictures and videos to their page to research and develop ideas, projects and hobbies.
Pinterest experienced a typical first year as a public company: a seemingly great start followed by a disappointing Q3 then followed by a stronger Q4 as yearly earnings were released. With Pinterest stock prices picking up again, currently at $20, investors may well be asking if Pinterest stock is a good buy?
The bull case for Pinterest:
Pinterest is very relevant with the younger market — 34% of social media users aged 18-29 in the U.S. use the app. Social media holds a strong pull to those of us who grew up in the era of fast-paced, social networking. Indeed, 70% of millennials prefer to shop online using Amazon (NASDAQ: AMZN), Shopify (NYSE: SHOP), or Mercado Libre (NASDAQ: MELI) instead of brick-and-mortar stores.
Pinterest is niche. Users research their interests and products with intent to buy, with up to 60% of millennials using it for this purpose, which is why Pinterest has such good strength in its ad-based revenue. With higher consumer interest, around 80% of active users have made at least one purchase seen through an ad, a figure that will continue to draw interest from companies.
Pinterest HQ is currently developing a catalog of ‘shoppaple’ products – ensuring that both its users and merchants will continue to use the app services for the foreseeable future. In addition, Pinterest users tend to be on the wealthier side with around 35% earning $50,000 – $79,000 per annum.
The Bull case is very strong for Pinterest. Its revenue for 2019 grew 51% year over year to $1,14 billion, whilst its Monthly Active Users (MAU’s) were reported at 335 Million in the 2019 Q4, up 26% year over year. International users bring in less money per person but the number of them has increased from 184 million to 243 million — a 35% increase last year. With no debt and a predicted revenue income of $1.5 billion in 2020, this stock might be worth pinning to the top of your list.
The bear case for Pinterest:
Social media is exceptionally crowded, and the likelihood of Pinterest becoming as big as Facebook (NASDAQ: FB) or Instagram is not that high in the short term. With its niche and admittedly unique take on an internet community, Pinterest could be seen as similar to the Microsoft-owned (NASDAQ: MSFT) LinkedIn as serving a limited purpose.
On the other hand, some are saying that Pinterest is in competition with Amazon and Google (NASDAQ: GOOG), containing elements of being a search engine and an online shopping platform. If so, there could be some worry as to how far Pinterest can grow into those heavily dominated sectors.
Up to 90% of Pinterest’s revenue comes from advertising, as 70% of users are female this could limit the overall range and diversity of advertisements that can then become profitable. Moreover, during the COVID-19 situation we find ourselves in, relying heavily on ad revenue during this time could lead to long term financial issues. As with the majority of social media platforms right now, ad revenue is down and it is a worrying sign for long-term investors.
So, should I buy Pinterest stock?:
One year since its IPO and Pinterest is a strong stock to invest in. I would also consider the stock undervalued right now when looking at its growth potential. Currently sitting at around $20 per share, this stock will continue to grow internationally, bringing in more users, more advertisements, and more revenue. With a younger, wealthier demographic, Pinterest is looking like a trendy new stock to keep an eye on.
As for the downsides, they are outweighed by the positives. Pinterest is proving itself to be innovative and bold, potentially expanding into the e-commerce sector as a diverse and varied, mood-board platform.
With around 93% of people using Pinterest to plan purchases, Rich Pins are designed to provide leads with useful information about products and services they are attached to.
Not really. In order to make money on Pinterest you need to have a business with a product to sell. Otherwise, you can become a well-known user which will encourage companies to pay you to advertise for them.
Depends on your opinion of Pinterest. Some investors believe it is overvalued due to the niche market and reliance on ad revenue, others believe that it is undervalued as the figures show great potential for 2020, despite COVID-19.
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