Pinterest (NYSE:PINS) went public in April. Its first-day return was 28.4%. Snap (NYSE:SNAP) went public in March 2017. While Pinterest stock has an amount of risk, Snap stock still has been really bumpy since its opening.
Its first-day return was 44.0%. Both raised more than $1 billion in their respective IPOs, and both don’t make money.
So, which would you buy? SNAP stock or Pinterest?
It’s an intriguing question.
A Look at SNAP Stock
In March, I discussed the reasons why I wouldn’t bet on SNAP. For me, it came down to the fact it had doubled in price in less than six months, this for a company that was having troubles hanging on to users and losing a boatload of money.
That being said, I did finish by stating that if you were someone with a high-risk tolerance, SNAP stock was one of the more intriguing low-priced stocks available.
Since then it reported Q1 2019 results April 23 and they were better than expected with a loss of $0.10, two cents better than the consensus. On the top line, forecasted revenue was $320 million, 4.2% higher than the analyst estimate. Finally, daily active users and ARPU were 190 million and $1.68 respectively, both well clear of analyst expectations.
However, it’s stock actually fell on the news, and it’s been on a downward trend ever since, although it’s still well above $10, which it first hit in February.
The problem, as analysts and InvestorPlace’s own Will Healy recently pointed out, is that Snap’s got a long way to go before it is profitable.
“Analysts predict Snap will continue to lose money until at least 2022,” Healy wrote May 7. “This means the company has to either increase debt or dilute its stock further to stay in business, let alone fund a counterthreat to Instagram.”
If you follow Tesla (NASDAQ:TSLA), you’re absolutely aware of the stress an ongoing cash crunch puts on a company. One wrong move and it could be lights out. That’s never an easy thing to put out of your mind if you’re the CEO.
However, Snap CEO did get a little good news about Instagram May 16.
Facebook (NASDAQ:FB), which had been testing Direct, a standalone messaging app for Instagram users, will now integrate the messaging capabilities directly into the Instagram app itself, saving Snap one less aggravation.
SNAP stock jumped more than 7% on the news.
My stance on SNAP hasn’t changed.
While I wouldn’t own it, I do feel it continues to move in the right direction. If it can continue to keep the lights on until becoming profitable, aggressive investors are wise to consider it.
What About Pinterest?
Pinterest stock was having a strong first month as a public company until it announced its first earnings report May 16 after the markets closed. Investors didn’t like the news.
As I write this, Pinterest stock has given back all be about 7% of its post-IPO gains.
Investors knew heading into Pinterest’s Q1 2019 earnings that it was losing money so the fact that it announced a loss of $41.4 million, 21% lower than a year earlier, should not have come as a surprise to anyone.
However, analysts were expecting a loss of 11 cents. The fact that Pinterest came in 200% higher with a 33-cent loss spooked investors.
“There is a lot of trepidation in the market today because of what we just saw with Uber and Lyft,” said John Mullins, associate professor of management practice at the London Business School.
Frankly, the fact that it grew revenues by 54% in the quarter to $202 million and reduced the amount of its loss year over year, are signs it could get to profitability long before Snap does.
The biggest positive I see looking through Pinterest’s Q1 report is the future potential of its international audience. Its monthly active users outside the U.S. grew 29% to 206 million, almost three times higher than those in the U.S. Yet, its average revenue per user internationally was a mere 8 cents compared to $2.25 in the U.S.
Should Pinterest take advantage of its international user base in terms of advertising, the sky’s the limit.
The Bottom Line on Pinterest Stock
Although Snap is making strides in its business, if you put a gun to my head and forced me to buy one of the two stocks, I would definitely go with Pinterest.
From where I sit, the risk associated with Pinterest stock is far less than with SNAP.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.