Pinterest (NYSE:PINS) is a solid company with plenty of growth ahead. However, there is a disconnect between PINS stock and the company.
Following the huge selloff in the tech industry in general, the stock is down 22% from its all-time highs. Currently, the stock has stalled around the $65 support level. I believe that this area of support may hold as it has been tested previously three times. If this support breaks, I expect the stock to trade close to the 200-day SMA of around $52-$55.
Patient investors should look to buy the dips at these levels as Pinterest has a very bright future ahead.
The Pinterest Platform Has an Engaged User Base
Pinterest greatly benefited from the coronavirus pandemic. As people around the world were forced into lockdowns, they needed to find alternative outlets to keep themselves preoccupied. The company saw its user traffic and engagement grow to record highs. In 2020, the company added an additional 100 million monthly active users (MAUs). This brings its total MAUs to 450 million in 2020. For reference, Pinterest has a higher MAU count than Twitter (NYSE:TWTR) despite its ubiquity in pop culture.
Buy PINS Stock To Take Advantage of Continued Growth
Pinterest has been firing on all cylinders in 2020. Looking at the company’s recent financial results, Revenues in Q4 2020 was $706 million, representing 76% growth compared to the same time last year. Full-year 2020 revenues increased as well from $1.14 billion in 2019 to $1.69 billion in 2020, a growth of 48%.
Even more promising than the headline revenue growth figures is that international revenues in 2020 had a massive growth of %. International revenues only made up 15.8% of total revenues. This indicates that there is plenty of room left to expand to other markets. The increase in international revenues was driven by both the 46% increase in international MAUs as well as higher average revenue per user.
The company’s global average revenue per user (ARPU) is also up 29% to $1.57. This is still a far cry from Facebook’s (NASDAQ:FB) global ARPU of $7.89. However, I believe Pinterest’s ARPU will only continue to grow in the future. At the current market cap of roughly $43 billion, the company is currently trading at a price-to-sales ratio of roughly 25x. Valuation wise, the company is a bit expensive. But I believe Pinterest could continue on this rapid growth trajectory for years to come.
Pinterest users may be more receptive to advertising than other social media users who may “zone-out.” In a Wall Street Journal article, Andrew Lipsman, principal analyst at research firm eMarketer stated, “All the biggest winners in technology have been predicated on developing a really powerful consumer habit.” If checking out Pinterest to “find inspiration” becomes a habit for millions of shoppers, I can see the company being much more valuable than its current market cap.
On the date of publication, Joseph Nograles held a LONG position in PINS and FB.