Pinterest (NYSE:PINS) is a go-to destination for inspiration but this once niche social-media company is now so much more. After a strong Q3 earnings report, Pinterest stock shows promise for the future. The tech giant is a safe-haven for advertisers thanks to a pandemic-fueled increase in engagement. As the broader market continues to struggle, Pinterest stock is the diamond in the rough.
Tech companies reported exceptional results this quarter but it’s safe to say that Pinterest takes the cake. The company beat analysts’ bullish forecasts, emerging as a social-media market darling this year. With a lot of upside left, an investment in Pinterest remains a safe play in a volatile-corona economy.
A Monster Quarter For Pinterest Stock
E-commerce gave tech companies a leg-up in a turbulent economy and Pinterest stood to gain from this. The social-media company reported third-quarter earnings yesterday and the numbers are impressive- to say the least.
As reported by CNBC revenue increased to $443%– a 58% increase year-over-year and beat analyst expectations by 15%. The company believes that this number will grow by 60% in the next quarter. Following the results, Pinterest stock rose 23% after markets closed adding to its 96% gain since Q2.
There are a number of reasons for Pinterest optimistic results. According to its CFO, Todd Morgenfeld, the company saw an unexpected increase in ad revenue. This is a spillover effect of advertisers boycotting other social media platforms. With increased political bias on Instagram and Facebook (NASDAQ:FB) advertisers took their ad bucks to a more product-focused platform.
Another factor is the boost in user-growth since the start of the pandemic. The platform currently boasts 442 million active users which is a 37% increase from last year. Users below the age of 25 show the highest levels of growth. This engagement translated into more ad revenue for the company.
As we approach the holiday season, Pinterest stock is poised for a greater upside. The investment is a worthy addition to your portfolio.
Pin This Stock For The Long-Haul
Pinterest seems like the underdog when compared to tech-giants like Facebook. However, the company’s business model is designed to be a long-term profit generator. With store closures across the nation, Pinterest’s platform serves as a major push for online spending. Although the app was primarily used for home or wedding inspiration it is also a place to discover new products.
This caters perfectly to the remote economy as retailers try to get in front of as many eyeballs as possible. Moreover, the diverse audience also makes it the ideal advertising platform for businesses of all sizes. In its most recent quarter, Pinterest stated that it saw ad revenue coming from small to medium businesses as well as large corporations. It also comes with the added appeal of being a platform that’s free of political bias.
The increased ad spend is also the effect of Pinterest’s growing audience. As people remain confined to their homes, Pinterest serves as a place for inspiration in their free time. This meteoric rise in user growth comes from international markets as well. The size of the audience is an encouraging factor for many advertisers. With the large number of small businesses in the U.S., this advertising pool will only continue to grow.
The Bottom Line On Pinterest
Pinterest’s ad-revenue driven quarter is a testament to the company’s ability to remain stable even in a turbulent economy. A source for inspiration that’s tied to e-commerce is the perfect recipe for the remote economy. But despite its successes, there is still plenty of room to grow.
As the brand continues to build its shopping features, it will funnel in more ad revenue. Pinterest recently announced a partnership with Shopify (NYSE:SHOP) in an effort to increase brand awareness on its platform. Given the potential for greater sales generation, the company will be able to monetize this increase in user-growth.
The social-media giant serves as an inspiration to other platforms for its corona-proof advertising model. Pinterest stock has great long-term potential and is definitely a buy in my books.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.