Pinterest is once again in the in IPO (aka, initial public offering) market. A couple weeks ago, it pulled its IPO and went silent.
Now it’s back, with a new filing. At this point, it’s setting its price at $15-$17 for 75 million shares. That’s about a $10.6 billion total valuation. But in 2017, it had a financing round of $12.3 billion, so even its most optimistic stock pricing ($17 a share) would have it fall under that price.
Somehow, the stock has lost $2 billion in value from 2017 to 2019.
Now, it may well happen that the IPO soars and doesn’t touch $17 again. It may also happen that Pinterest and its bankers figure it’s better to be conservative with the valuation rather than fully price it and set itself up for disappointment in its early trading days or when it has to report earnings.
But there’s no doubt that the new wave of tech IPOs is starting to look like it did back when the dotcom boom hit.
Pinterest and the New Tech IPOs
Lyft (NASDAQ:LYFT) just went public. Uber is soon to follow. Zoom Video Communications is about to IPO, as are biotechs Hookipa Pharma and Turning Point Therapeutics, as well as insurer Palomar Holdings.
The real question is, as these firms enter the “real world” of public trading, how will they get along with the other players already out there.
The reason people are comparing Pinterest to Twitter (NYSE:TWTR) is that they kind of take up a similar space, but also both have about the same amount of monthly active users (MAU), the major benchmark for social media companies.
Basically, MAUs are a measure of how many people use the site at least once a month. There is also a daily active user metric, but MAU represents a better view of an app’s entire user base. DAU volume varies but MAU is more consistent.
When comparing Pinterest with TWTR, also remember that Pinterest is working very hard at expanding its MAUs as well as its revenue base right now. More is better — for investors and the Street.
TWTR, on the other hand, is an established company and currently is purging its app of all the bots and various other kinds of cybertrash that has accumulated over the years. That means its growth is slowing, but as a more mature company, we’re getting a better picture of its real revenue, user base and profitability.
This is an important difference. The market forces will change at some point for all companies — in young companies, the Street wants subscriber growth, and in more mature companies, it wants solid, expanding revenue streams.
That’s not to say that Pinterest isn’t making money. Last year the company said ad revenue was approaching $1 billion. But the thing to remember is that TWTR works across platforms, so it can work with all the big social media apps. Pinterest can’t; it will be on its own for now, which could be a good thing or a bad thing.
My Portfolio Grader has TWTR as a B-rated stock right now. And a B in the hand is worth more than two in the IPO stage.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.