Over the past month, shares of Pinterest (PINS) have been up more than 13%, marking a relatively strong move for this growth stock. This improved trajectory is something investors like to see.
Indeed, shares of Pinterest have somewhat stagnated since the beginning of the year. Through a couple peaks and valleys, investors can now buy PINS stock at roughly the price the social media company started the year. For many growth investors, that may sound like an intriguing idea. (See Pinterest stock chart on TipRanks)
Let’s dive into what’s been driving volatility in PINS stock of late.
Strong Earnings Bodes Well for Investors in PINS Stock
Despite Pinterest seeing a 10% decline in late April, on the day the company reported earnings, all hope is certainly not lost with this fast-growing social media player. Pinterest reported what otherwise appears to be strong numbers. The continuation of a pandemic-fueled growth spurt for Pinterest is bullish for growth investors in this social media stock.
Indeed, Pinterest’s reported numbers showed what appears to be a pretty healthy growth trajectory for this company. Among the highlights are the following:
Revenues of $485 million, indicating 78% year-over-year (YOY) growth
Global monthly active users (MAUs) increased by 30% YOY to 478 million
Global average revenue per user (ARPU) expanded by 34% YOY to $1.04
What’s intriguing about these numbers is the fact that Pinterest’s management team seems to believe the future looks even brighter. While the company boasted year-over-year revenue growth of 78% this past quarter, which is incredible in its own right, management projects second quarter revenues to increase by approximately 105%.
Unfortunately for investors in PINS stock, the one item investors seem to be focusing on right now is MAU growth. Pinterest forecasted U.S. MAU growth to be relatively flat year-over-year. At the same time, Global MAU growth in the “mid-teens” is still pretty good. Accordingly, there’s a takeaway here that Pinterest is really growing in markets outside of the U.S.
Taken in this context, these numbers really don’t seem that bad at all. Pinterest is diversifying its geographic footprint, and is growing its revenue at what could be a triple-digit pace. Investors questioning the growth status of this $45 billion social media powerhouse appear to be missing the bigger picture with this stock.
Monetization the Key for Many Investors
As with other social media purveyors such as Facebook (FB), some investors were reluctant to jump in early on such stocks due to a lack of sustained historical profitability data. Indeed, Pinterest could offer more on the profitability front, and long-term investors may steer clear of this stock for this reason alone.
That said, as fellow TipRanks contributor Tom Taulli pointed out in a recent piece, monetization is coming. Investors simply need to be patient.
Mr. Taulli wrote, “During the earnings call, Pinterest CEO Benjamin Silbermann noted, 'We also saw product searches grow more than 20x year-over-year. Increasingly, people see Pinterest as a place to not only get inspired, but also to shop…Pinterest has a lot of runway left for monetization in international markets. For example, in the quarter, there was encouraging progress in Brazil, its first Latin American market.'”
Investors certainly have reason to agree wholeheartedly with this statement. Pinterest is moving in the right direction in terms of monetization. However, the company appears to be more focused on growing its market share and eyeball count without jeopardizing what could be a larger cash flow stream down the road. For long-term invesotrs, that’s a great thing.
What Analysts Are Saying About PINS Stock
According to TipRanks’ analyst rating consensus, PINS stock comes in as a Moderate Buy. Out of 19 analyst ratings, there are 12 Buy recommendations and 7 Hold recommendations.
As for price targets, the average analyst Pinterest price target is $86.33. Analyst price targets range from a low of $65.00 per share to a high of $102.00 per share.
Pinterest is a stock that has certainly displayed some serious volatility as of late. Further volatility might be looming on the horizon, with so much uncertainty about what the Federal Reserve will ultimately decide to do with rates.
However, Pinterest is a long-term buy-and-hold opportunity. This is a stock with tremendous long-term upside for those who are patient. Right now, it’s looking like a decently-priced growth stock relative to its long-term potential.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.