When it comes to social media stocks, there are a few giants that get the bulk of the attention, such as Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR). But there are other social media companies that deserve investors’ attention. One of these is Pinterest (NYSE:PINS). This has been a trying year for those who bought PINS stock — with an impressive run after the company’s April IPO, followed by an even bigger slide starting in the fall — but the turmoil seems to have settled.
And now Pinterest stock has levelled out over the past month or so. With shares now trading below their IPO price, is now the time to consider an investment in Pinterest?
PINS Stock: A Social Media Investment That’s Different
Facebook and Twitter are mature social media platforms. They have a huge number of users, but their growth rates have slowed significantly. For example, in its last quarter, Facebook reported it had 2.45 billion monthly active users (MAU). That’s an 8% gain over the previous year. Last February, Twitter reported it had 321 million MAU. That was down from the previous year, and marked the third-straight quarter where the platform lost users. In response, Twitter announced it would stop publishing that metric altogether.
In addition, both Facebook and Twitter have been embroiled in controversy over data privacy and the use of their platforms for election tampering. Both have faced government scrutiny and the prospect of regulation. In 2019, Facebook was hit with a record-setting FTC fine, after being ordered to pay $5 billion in penalties for privacy violations.
Pinterest is different. It’s a social media platform, but one that’s on the upswing. Where Facebook and Twitter are seeing relatively flat user growth, in its last quarter Pinterest announced MAU numbers that were up 28% compared to the previous year. Revenue was up 47% for the quarter. Where Twitter and Facebook have been under fire for their policies, Pinterest has earned praise for its swift response when users post controversial content.
That all sounds good, but something has spooked investors, resulting in a PINS stock price that’s now just over half the $36.56 it hit in mid August.
Why the Fall Punishment for Pinterest Stock?
Shortly after its April IPO, Pinterest stock had a cooling off period, but then it rapidly climbed through the summer. At the end of August it began to slide, and the decline continued through the fall. PINS stock dropped 17% in a single day after reporting Q3 earnings on Oct. 31. Although the company beat estimates for earnings per share, and posted better-than-expected user growth, revenue and average revenue per user were misses.
As InvestorPlace contributor Ian Bezek points out, concern about international growth hit PINS stock hard. The worry wasn’t that the company wasn’t seeing growth outside of the U.S., it was actually the opposite. International growth is accelerating faster than the American market, and investors aren’t convinced that Pinterest can monetize those users to the same extent.
In October, New York University marketing professor Scott Galloway tweeted his list of “overvalued unicorns” with Pinterest at the top.
Is Now the Time to Invest in Pinterest?
At its current $18.40, the PINS stock price is below its $19.00 IPO price, and the $23.75 it hit on its first day of trading.
However, the tumble that began last fall appears to have halted. There have been some minor ups and downs, but Pinterest stock has remained flat for over a month, suggesting the worst is over.
Pinterest is expected to report Q4 earnings at the start of February and that’s a wild card. Long-term, PINS stock has real potential and its current price makes it tempting. But if the company reports Q4 numbers that once again show American user base growth not keeping up with the international pace and a corresponding revenue miss, its possible that Pinterest stock could take another hit.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
