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Pinterest Is a Long-Term Winner Thanks to Its User Engagement

Pinterest (NYSE:PINS) is a solid company with plenty of growth ahead. However, there is a disconnect between PINS stock and the company.

the pinterest (PINS) logo on a mobile phone held by a woman

Source: Nopparat Khokthong / Shutterstock.com

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.

According to Hootsuite, in terms of users, Pinterest ranks as the 14th largest platform in the world. While this is an impressive statistic, the company still has room to grow in order to catch up with Instagram. In line with this continued growth, the company accelerated the launch of new features to keep up with the rising user engagement. These features include a “Today” tab as well as a “Verified merchant program.”

The release of these features is fantastic news for Pinterest shareholders. Fundamentally, Pinterest is a platform “for inspiration and planning.” Its boards generally have several categories such as beauty, fashion, home décor, etc. This puts it in a unique situation in terms of user engagement among all social media companies. Unlike other social media platforms which are for general use, people use Pinterest to find what they want. This gives it a unique value proposition for advertisers and e-commerce firms.

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.

Investor Takeaway

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.


Article printed from InvestorPlace Media, https://investorplace.com/2021/04/pinterest-pins-stock-long-term-winner-user-engagement/.

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