Pinterest (NYSE:PINS) enjoyed some early IPO success, but soon found out what it’s like to have the market turn against its stock. After hitting a recent low, is now the time to get into Pinterest stock before a strong 2020?
It has been a tough ride for investors who believe in the long-term fundamentals of the business, but the decline has also presented opportunity. Some would certainly argue that, even after a decent rally from the lows, Pinterest stock is still offering investors an opportunity.
Is Pinterest Stock Worth Owning?
The short answer here is yes, in my opinion. Keep in mind that Pinterest will report earnings on Feb. 6, after the market close. For truly long-term investors though, one quarter of business is hardly significant.
Put simply, Pinterest stock matters because the shift to e-commerce only continues to grow. Below is an image from FRED highlighting just that, as online sales continue to make up a larger portion of total retail sales. After having just crossed the 10% mark not that long ago, it shows that there’s a lot of room for growth on the e-commerce front.
Just recently, it was reported that Pinterest had passed Snap (NYSE:SNAP) in U.S. active users. In other words, it’s one of the top social media platforms out there, with its user base of 82.4 million accounts. Internationally, it has more than 300 million users and will likely soon pass Twitter (NYSE:TWTR).
However, unlike Facebook (NASDAQ:FB), Pinterest isn’t plastered with fake news and frustrating news stories. Unlike Twitter, it’s not a toxic, troll-filled community. Instead, it’s a simple layout that drives users to make purchases.
And purchasing they are. Let’s look at some statistics.
A very recent update from the company noted that shopping catalogs on Pinterest have increased 75%, with 48% of its users relying on the platform to find and shop for products. Finally (and this one is a biggie) brands have seen revenue climb 173% “after increasing Pinterest spend by 67%.”
Combine that with some information from Statista, and it’s clear that Pinterest is very efficient at converting views into sales, while at the same time being completely undervalued by online marketers. That’s set to change, in my opinion, as ad spending only increases for e-commerce. Marketers go to where the opportunity is. They don’t care if it’s Facebook, Instagram, Pinterest, Twitter or otherwise. If it works, they’ll spend.
From Statista, we see that Pinterest was users’ second-favorite platform when seeking out a platform for finding holiday gifts. At 25%, it trailed only Facebook and beat out Instagram, YouTube and others.
Pinterest has our attention, even if it doesn’t have the attention of Wall Street yet. The company is a driving gateway for consumers who are intent on making a purchase. While Facebook and its Instagram platform are important, one could argue that Pinterest is the second most-important social media platform for marketers, even if it’s not getting credit for it yet.
That said, revenue growth is impressive. Estimates call for $1.11 billion for fiscal 2019. With Pinterest stock set to report Q4 earnings, we should find out if these estimates are in-line soon enough.
If they are, it will represent 45.5% growth from 2018, when revenue came in at $756 million. $12.5 billion doesn’t seem like a rich market cap for a company with revenue north of $1 billion and growing at a 40% clip. For 2020, consensus estimates currently call for revenue of $1.51 billion. Further, earnings estimates call for a swing to profitability in the coming fiscal year.
In my view, Pinterest is proving to be an asset to marketers in a growing secular industry. There will be challenges — like international growth — but if it remains a go-to sales converter, Pinterest will only hover around $20 for so long. $30-plus wouldn’t surprise me in the next year.
Trading PINS Stock
When the company reports earnings, it may be a large mover of the stock price. Shares bottomed at $17.39 in December and broke out over downtrend resistance (purple line) in January. After racing up to $24, Pinterest stock has been consolidating.
Now being sandwiched between the 20-day and 100-day moving averages, something has to give. If it’s the 100-day, look for a move up to the recent high at $24.05. Over it puts $25 on the table, followed by the newly established 200-day moving average at $25.35.
If support gives way, look for for a drop down to uptrend support (blue line) and the 50-day moving average. Both come into play near $20.