Why Pinterest Stock Should Be On Your Radar

Pinterest (NYSE:PINS) is expected to report earnings after the markets close on October 28. The social media company has continued to gain enormous popularity during the novel coronavirus pandemic; in fact, PINS stock has climbed 176% so far this year.

the pinterest (PINS) logo on a mobile phone held by a woman
Source: Nopparat Khokthong / Shutterstock.com

While many companies took a nosedive, Pinterest’s status as a social media platform enabled it to evade much of the pain other businesses have experienced. While everyone had to avoid dining at restaurants and going to movie theaters for a period of time, there were no such restrictions on online activities.

In fact, thanks to the pandemic, there was even more reason to stay online behind a computer screen than ever before. For just one example of this, take a look at the massive rise in videogame purchases and gaming hours logged.

This online growth dynamic will change in time as we return to some semblance of “normalcy.” However, the fact remains that Pinterest has added many users during the pandemic. We shouldn’t expect a massive reversion once frequent in-person interactions are considered safe again.

Given that Pinterest’s business is based in digital advertising, the more users its platform attracts (and retains), the better. As such, its success so far in 2020 is good news for PINS stock heading into its Q3 report on Wednesday.

Why You Should Keep an Eye On PINS Stock

Here’s a quick look at what makes Pinterest work and the long-term positives for the stock.

Much of the userbase on the platform has so-called “buyer’s intent.” They might use it to find a collection of food recipes to make with a new pressure cooker. Or to find a collection of the best looking leather jackets for the upcoming winter season. Whatever is “pinned” to a person’s board often presents a viable opportunity for relevant ad placement. This helps separate it from other more “socially” based social media platforms like Facebook (NASDAQ:FB).

Many users are looking at Pinterest for “inspiration” and ideas related to a specific goal — a goal for which there might be a product to advertise for directly. For example, a user looking at DIY home projects might be served ads for craft supplies or tools.

The way Pinterest makes most of its money through “promoted pins” is crafty. When someone searches for a subject, they’ll see a promoted pin advertising a related product. But these pins are not unlike those made by other users.

Pinterest did hit a pandemic-related roadblock earlier this year: “[M]any advertisers suspended campaigns and thus Pinterest’s prices on ads plunged. Average revenue per user fell 11% in the U.S. and even more internationally given the advertising slowdown.” But analysts such as InvestorPlace.com’s Ian Bezek and Luke Lango expect to see it make a quick comeback.

Specifically, they cite fellow social media company Snap Inc (NYSE:SNAP) and its breakout success this year as an indication of “a digital ad renaissance.” Snap showed that ad pricing challenges are subsiding.

Analysts expect this will also be the case with Pinterest’s ads. In fact, Lango sums up the long-term case quite simply: “Enormous ad business growth plus enormous user growth is a recipe for long-term success in the social media space.”

Bottom Line on Pinterest

There’s reason to suspect that the Q3 report will support this long-term growth dynamic. There’s also reason to think that the growth won’t come to an abrupt end anytime soon.

While we will eventually return to some sort of normal, people will keep using Pinterest. The coronavirus was fuel for the fire, but that fire was already burning. Now it should continue to burn brighter in the months and years ahead.

It’s always possible that the report could disappoint. But even so, it’s important to keep the long-term narrative in mind. Earnings misses can trigger irrational moves to sell. If you think Pinterest will continue to thrive, then there’s no reason to abandon ship, hit or miss on Wednesday.

On the date of publication, the author did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Article printed from InvestorPlace Media, https://investorplace.com/2020/10/why-pinterest-pins-stock-should-be-on-your-radar/.

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