Pinterest, Inc.
PINS
was an early pandemic winner, soaring from $15 a share in March 2020 to over $85 in February 2021. The digital discovery platform has lost some subscribers over the past year and PINS shares have tumbled.
Some of Pinterest’s downturn makes sense because it simply soared far too quickly. That said, many of its fundamentals are solid and investors might want to consider taking a chance on PINS stock with it set to report its Q4 financial results on Thursday, February 3.
Digital Ads Dominate
Pinterest operates a visual discovery platform that enables users to find inspiration for everything from home-cooked meals to planning trips and remodeling rooms. The firm launched roughly a decade ago and it’s thrived in the e-commerce and digital media age. More importantly, its revenue has soared as advertising dollars shift to digital.
Total global digital ad spending reportedly climbed by over 20% last year to account for 60% of the $750 billion advertising market. More importantly, ad dollars spent on digital channels are projected to expand from 51% in 2019 to just under 70% by 2024, according to eMarketer.
Pinterest benefits from this growth as people pay to avoid ads on platforms like Spotify. Plus, PINS has become a hit with advertisers, small businesses, entrepreneurs, and others because paid content and ads fit seamlessly into the Pinterest platform. And it’s boosting its ad tech and video features.
Image Source: Zacks Investment Research
Other Fundamentals
Pinterest added 100 million new monthly active users in 2020 to close the year with 459 million. Meanwhile, its revenue climbed 48% to come on top of its 51% sales expansion in FY19 (its first year as a public company).
Unfortunately, PINS slowly shed some of the users it grabbed while people were stuck at home. Pinterest closed Q3 with 444 million MAUs (down 15 million from the end of FY20). Despite the drop, PINS has experienced increased interest among younger users and it’s gaining more traction on mobile.
Pinterest became a victim of its own success and its stock price was due to fall back to Earth at some point. PINS is down 70% from its peak to trade near where it was prior to the initial covid selloff at $27 per share. The selloff has completely recalibrated its valuation, with it now trading at a more reasonable 31.6X forward earnings. This marks a 36% discount to the Internet–Software space and comes in far below the 60X it traded at as recently as November.
Looking ahead, Zacks estimates call for Pinterest’s FY21 revenue to soar another 52% to $2.6 billion, with FY22 set to surge 29% to $3.3 billion. Meanwhile, its adjusted FY21 EPS are projected to skyrocket 162% to $1.10 a share, with 2022 set to climb 26% higher.
Bottom Line
Pinterest lands a Zacks Rank #3 (Hold) at the moment and it’s topped our bottom-line estimates by an average of 50% in the trailing four quarters. PINS also lands “A” grades for Growth and Momentum in our Style Scores system.
On top of all that, Pinterest boasts an impressive balance sheet with $2.3 billion in cash and equivalents ($3.2 billion in total assets) vs. $454 million in total liabilities. And Pinterest’s current Zacks consensus price target of $59.85 a share marks 120% upside to its current price of roughly $27 per share.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
