Pinterest (NYSE:PINS) is the only platform out there that serves as a visual search engine for ecommerce that isn’t filled to the brim with political nonsense and trolls. It is the platform that mutually aligns the interests of the shopper and the advertiser. This truth is shown in its user growth as well as in its revenue growth. PINS stock becomes even more attractive if you compare it to Twitter (NYSE:TWTR) and Snap (NYSE:SNAP).
With that in mind, let’s take a deeper dive into what makes this social media stock worth your consideration.
Pinterest Has a Powerful and Unique Platform
Pinterest’s platform offers numerous unique services for its users that no other social media platform can satisfy. For example, Pinterest is the way to go for answers to niche problems like the following:
- If you’re re-doing your apartment/home or moving into your dorm room and want inspiration.
- Looking for DIY (do it yourself) projects. The DIY Projects group on Pinterest has over 158k followers.
- If you’re in search for at home workout ideas.
- If you are having a dinner party and need a meal idea that is simple, quick and delicious.
These are just a few of the varied needs its platform can easily solve. But the appeal of Pinterest goes far beyond the functional elements of its design. In 2019, co-founder Evan Sharp stated, “Pinterest may be the last positive corner of the internet.” I bet if you asked Twitter or Facebook (NASDAQ:FB) users if they found their respective platforms positive, they’d laugh in your face.
Along side its highly functional platform and positive community, it’s also geared to gain popularity as more shoppers resort to online interactions over the brick-and-mortar experience. The future of shopping will rely on online experiences that are similar to that of in-store and emulate the joy found in browsing and trying on products. Pinterest has a “Try on” feature that allows users to virtually try on products they find during their search.
This feature is becoming increasingly powerful. For instance, the company recently announced the ability to test a variety of eyeshadows via Try on. If Pinterest finds smashing success with this feature, then all sorts of doorways should open up with this virtual reality feature.
Why Digital Advertisers and Ecommerce Companies Love Pinterest
But it’s not just the users that love Pinterest. PINS stock is up more than 300% over the past 12 months because advertisers love it too. Here’s a bit more into why they love it so much:
- 89% of users go to Pinterest for “purchase inspiration.” If users go to the platform with an intent to purchase something, advertisers would be foolish to not spend their ad money with Pinterest.
- Eight out of 10 U.S. moms use Pinterest.
- A survey done by Pew Research Center showed that 41% of U.S. Adult Pinterest users have an income $75,000 or greater. As such, a majority of Pinterest users have the disposable income to make daily purchases. Compare this to 22% for Snapchat and 31% for Twitter, respectively, and the appeal is clear.
- Pinners (users) are 3x more likely to move from Pinterest to the brand’s site than any other form of social media.
Lastly, according to Statista, as of end of 2019, Pinterest had the highest year-on-year referral traffic growth. This compares to the likes of YouTube, Facebook, Instagram and Twitter.
The Growth Story Behind PINS Stock
In Q4 2020, the company had a total of 459 million Monthly Active Users (MAUs). International MAUs represented 78.65% of total MAUs, yet international revenue only represented 20.32% of total revenue for the quarter. Pinterest stated that it is in the, “early days in terms of international rollout” and it’s in the middle of hiring sales teams in new international locations. Once it evolves and grows out its international presence, I feel confident that Pinterest will be able to monetize its international user base and consistently grow its revenue at a ferocious pace.
During Q2 2020, ad spending budgets were put on pause and all three social media companies saw a blip in revenue. But who recovered the fastest and saw the largest growth? Pinterest did.
With the 2020 election, one may have predicted that Twitter would have had the highest user growth. However, Pinterest saw the highest user growth on a yearly basis. It was also thought that Pinterest’s user growth would decline after Q2 once the world began re-opening, but the demand for the platform did not wither.
Gross margins are a company’s ability to buy something for ‘x’ cost and sell it for ‘y’ price. The higher the gross margin, the more profitable that business/product should become. As you can see, Pinterest’s gross margin expansion far out-grew that of Twitter and Snapchat.
Pinterest Is Set to Outperform
The company has incredible revenue and user growth as well as outstanding margin expansion. Add to that the fact that Pinterest is the only social media platform that can escape the political nightmare that the world is living in, and the case for PINS stock is even stronger.
Also consider the following when comparing it to its competition.
Q1 2021 management revenue guidance:
- Pinterest management expects low 70% range growth in Q1
- Snap management expects between 56-60% range growth in Q1
- Twitter management didn’t give guidance
Yahoo Finance Analyst 2021 full year guidance predicts Pinterest to achieve only 48% year-over-year revenue growth in 2021 despite estimating 73% growth in Q1. Is its revenue growth just going to fall off a cliff in subsequent quarters? I think not. In fact, I believe Pinterest estimates will continually be adjusted upwards and that will be reflected in price appreciation.
On the date of publication, Thomas Logue, CFA, did not have (either directly or indirectly) any positions in the securities mentioned in this article.