Advertisers are savvy. They know that more than ever, the best way to reach customers is online. Digital advertising continues to grow, and that’s just another reason for investors to appreciate Pinterest (NYSE:PINS) stock.
Pinterest stock is seeing impressive growth in both revenue and earnings. And the company is rolling out some impressive new features that will allow it to capitalize on the growth of digital advertising and marketing.
And best of all, PINS stock is a veritable bargain these days. That’s why it’s one of my favorite social media stocks to own.
PINS Stock at a Glance
San Francisco-based Pinterest lets users create online pinboards about their favorite topics or interests. Pinboards can be recipes or fashion. They can include great photos, animated GIFs or videos. They can be pretty much anything.
Pinterest went public in 2010 and had a successful initial public offering. It now has a market capitalization of just more than $36 billion.
But the company is having a rough 2021. PINS stock is down 19% on a year-to-date basis, thanks to a sizable fall since the company issued its second-quarter earnings report.
The report wasn’t horrible, so to speak. The company beat analysts’ expectations for both earnings and revenue, posting $613 million and an adjusted earnings-per-share of 25 cents. Wall Street was expecting $561.88 million in revenue and adjusted EPS of 13 cents.
But the market responded poorly to Pinterest’s disclosure that its monthly average users were down 7% on a year-over-year basis. I don’t think that was terribly surprising, considering a year ago people were isolated from Covid-19 lockdowns and pretty much living through social media.
But regardless, Pinterest stock is hugely discounted right now. And if you are like me, and believe in the long-term prospects for PINS stock, you’ve got to like what appears to be a rare buying opportunity.
How Pinterest Is Leveraging Digital Advertising
According to a report commissioned by the Interactive Advertising Bureau and conducted by PwC, spending in digital advertising rose by 12.2% on a year-over-year basis in 2020.
That’s a big number, considering how the economy unraveled in the second quarter of the year from Covid-19. While second-quarter growth fell by 5.2% in the second quarter of 2020, spending was up by 11.7% in Q3 and by 28.7% in the fourth quarter.
That’s why companies like Pinterest are leaning hard into growing their advertising platforms.
This year, the company plans to begin testing what it describes as “seamless on-platform transactions” later this year. Put simply, Pinterest hopes its upgraded platform will give users the ability to purchase items that they post.
It says the new updates will separate it from other platforms: “we believe that post-COVID shopping engagement could be more resilient than overall engagement. It isn’t enough for Pinners to be able to find inspiring products and services on our platform. We must also make it easy for them to buy the products that bring their dreams to life.”
Pinterest says that 40% of its customers are more likely to acknowledge that they love shopping. That’s a big number, and its an attractive network for companies — both large and small — to target would-be buyers with their products.
The Bottom Line
I think Pinterest is a great social network — although its founder and CEO, Ben Silbermann, would disagree. He says the platform is a “catalogue of ideas” and not a social media platform, per se.
My viewpoint is that Pinterest is what social media should be. Rather than getting caught up in political debate and divisiveness, Pinterest is a place that actually brings people together to talk, share and celebrate common interests. So of course, advertisers are going to want to be there.
PINS stock is down right now because the company saw record usage in 2020 during the Covid-19 pandemic and then failed to grow those numbers as people began returning to their normal lives in the second quarter of 2021. It’s pretty much exactly what some analysts said would happen, but Wall Street completely overreacted to the loss of MAUs.
Rest assured, PINS stock is a quality bet on the power and growth of digital advertising. And when the company’s upgraded platform allows users to make purchases even easier than they are now, Pinterest stock will reap the benefits.
PINS stock has a B grade and a buy recommendation in my Portfolio Grader.
On the date of publication, Louis Navellier had a long position in PINS. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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