Want to be like Warren Buffett? That’s easier said than done, as you’d have to believe in companies that investors are largely avoiding. Right now, Pinterest (NYSE:PINS) fits that description. But could PINS stock be a Warren Buffett type of play?
Absolutely. By the beginning of August, Pinterest shares were down year-to-date (YTD). Currently, they’re down about 16% so far. The pessimism has been palpable ever since the skeptics started deriding the stay-at-home trade in mid-2021.
But, perhaps that’s where the skeptics are mistaken. PINS stock shouldn’t simply be pigeonholed as a stay-at-home trade.
Right now, the bullish thesis depends on whether Pinterest — as both a business entity and social media platform — will have staying power. Judging by the number of users still active on Pinterest, however, it’s reasonable to conclude that this name is actually thriving.
PINS Stock at a Glance
It’s no secret that PINS stock performed well in 2020. Last year, people sought stay-at-home activities due to the pandemic. But the thing is, stocks don’t just go up forever. After a massive bull run, it’s perfectly normal and healthy for the buyers to take a breather.
Keep in mind, PINS stock rallied from around $12 in March of 2020 to a resistance level of around $85 in February and April of 2021.
We’re talking about gains in the hundreds of percentage points here. So, it would be reasonable to expect PINS to cough up some of those amazing profits at some point.
After topping out early in the year, PINS stock slid to around $57 on the first day of September. Contrarians and value hunters shouldn’t have a problem with this, however. Now they can now purchase the shares at a much more favorable price point.
What’s the Issue Here?
Bearish-leaning traders seem to have assumed that the rollout of Covid-19 vaccines means Pinterest will lose its user base. To me, that’s short-sighted.
Of course, I’ll acknowledge that the pandemic certainly caused some people to try Pinterest for the first time, or just use it more often then they had before. However, it’s incorrect to presume that users will simply abandon Pinterest once the reopening is in full effect.
The ultimate determiner here is the data, so let’s see what PINS reported for the company’s second quarter of 2021.
As it turns out, this company’s global monthly active users (MAUs) actually increased by 9% year-over-year YOY, up to 454 million. There’s no reason to take issue with 9% MAU growth. So, what could the PINS stock skeptics possibly have a problem with? Maybe they didn’t like this statement in the release:
“The evolution of the COVID-19 pandemic and related restrictions remain unknown, and we are not providing guidance on Q3 2021 MAUs given our lack of visibility into certain key drivers of engagement.”
No Guidance? No Problem
If there’s one thing that the market doesn’t like, it’s uncertainty. Investors want clarity and confidence, plain and simple. In fact, sometimes they’d prefer ill-informed future guidance over no guidance at all.
Pinterest, however, has evidently chosen to be honest and admit that it isn’t prepared to provide MAU guidance right now. But that’s not a bad thing at all. Rather, it leaves the door open to a positive surprise in the upcoming quarter.
Moreover, while MAUs are the lifeblood of a social media platform, revenue generation is also important. In that area, Pinterest excelled. For Q2 2021, the company grew global revenues by an astounding 125% YOY to $613 million.
With that, Pinterest CEO Ben Silbermann is prepared to face the future, irrespective of the changes brought on by Covid-19. Silbermann noted the folllowing:
“While we navigate through pandemic impacts, Pinterest is focused on building for the long-term by transforming from a place to browse, save and organize to a community of inspiring people sharing their passions and expertise.”
That should help assure investors in PINS stock.
The Takeaway on PINS Stock
It’s not always easy to find bargains among social media stocks. Sometimes, they’re just downright expensive.
But that doesn’t seem to be the case with PINS stock right now. Instead, the share price appears to be justified by Pinterest’s large user base and impressive revenue growth.
Therefore, contrarian investors should see an opportunity here. Pinterest appears to be maintaining a loyal following despite shifting market conditions.
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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