Pinterest (NYSE:PINS) surged past its $19 IPO price, and is climbing nearly 40% in 2020, after earnings handily beat estimates.
The internet advertising site, which uses small boxes called “pins” to lead users based on their interests, lost $36 million, 6 cents per share. But revenue for the quarter was $400 million, $1.1 billion for the full year. The company said it had earnings before interest, taxes, depreciation and amortization (EBITDA) of $77 million.
It was the revenue number, 46% ahead of a year ago, that really set tongues wagging. Pinterest zoomed in the after-hours market by 19%. The shares opened Feb. 7 at $26.99. That’s a market capitalization of $15.3 billion.
The Next Facebook?
Analysts seem to have turned on a dime, from thinking of Pinterest as the next Uber (NYSE:UBER) to seeing it as the next Facebook (NASDAQ:FB). The company recently passed Snap’s (NYSE:SNAP) Snapchat to become the third-leading social platform, based on monthly users.
Management seemed to share the new enthusiasm, predicting the company can top 2020 revenue estimates of $1.47 billion.
Pinterest began life in 2010 as an idea center where do-it-yourselfers could “pin” ideas to a virtual whiteboard. What it delivers, especially for women, is the “serendipity” they might have gotten in the past browsing a mall or a magazine.
CEO Ben Silbermann, who co-founded the site in his 20s, is acutely aware of social media’s credibility issue. When Pinterest found people were looking for vaccine information on the site, he sought verified sources like the Centers for Disease Control and Prevention and gave them exclusive rights to post about it. Pinterest also created a “compassionate search” function, using clinical psychologists, to make sure those seeking help with depression got real help rather than nonsense.
It’s doing the same thing with the 2020 elections, rolling out a “civic participation policy” aimed at preventing the spread of “false or misleading” information. Silbermann calls Pinterest “an inspiration platform” rather than a social network.
Bad Days Behind It?
Pinterest came public last April and its first trade was at $23.75, up 25% from the IPO price of $19. But a negative third-quarter report caused investors to sour on it, and in November it traded at $18.71.
Like many other recent tech unicorns, Pinterest has a dual-share structure, giving Silbermann and co-founder Evan Sharp control. Silbermann says it’s so they can run the company “for the long term.” But the structure has come under criticism thanks to CEOs like Uber’s Travis Kalanick and WeWork’s Adam Neumann.
Pinterest’s newest features are all built around shopping. Its new Try On Lens lets women see what lipstick would look like on them, using augmented reality. The tool is being rolled out with major lipstick brands.
The Bottom Line on Pinterest Stock
Most analysts, and many investors, were sleeping on Pinterest, after it lost $125 million in the third quarter on revenue of $280 million.
But InvestorPlace’s Chris Tyler was not among them. He wrote in late January that the stock was “an ironclad buying opportunity.” He explained how the coronavirus was driving people into their homes, but how online shopping can bridge the gap.
Josh Enomoto also saw the pros of buying Pinterest, citing its popularity among young women. He called it a speculative bet.
The stock still trades well below its highs over $36, meaning it has room to run. On the other hand, the current price is 11 times revenue, and earnings have yet to appear.
My view is that if you like and understand the site, this may be the speculation you’re looking for.
Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.