Pinterest (NYSE:PINS) was one of the companies that made big gains during 2020’s pandemic lockdowns. Consumers who couldn’t get out to shop instead posted and clicked on images of products they liked on Pinterest in record numbers. If you owned PINS stock in 2020, you enjoyed a very nice 254% return on your investment that year.
However, 2021 hasn’t played out the same way. With consumers setting aside their devices to get out of the house, Pinterest has seen its U.S. user base shrink from 2020 levels.
PINS stock has suffered as a result. It was already a tumultuous year when the company reported second-quarter earnings on July 29.
Despite a 125% year-over-year increase in revenue for the quarter, Pinterest’s stock plunged 18%. At this point, shares are trading at around $53, just slightly over 2021 lows and down 21% since the start of the year.
But if you look past the panic over declining U.S. users (I’ll explain why you should do that in a moment), then downtrodden PINS stock is actually an interesting opportunity.
Overseas Growth Is Key To Long-Term Growth in PINS Stock
Several days ago, I wrote about a key factor in the PINS’ long-term growth equation: international users. It’s worth revisiting and expanding upon this issue because many potential investors are getting hung up on the company’s post-lockdown, shrinking U.S. numbers.
In its second-quarter earnings, Pinterest reported that U.S. MAUs (Monthly Active Users) had declined 5%. Worse, that decline had increased to 7% as of July 27. Cue the panic. PINS stock went into free fall.
However, what got less attention was the fact that International MAUs increased 13% during the same period. Because the rest of the world is a much larger market than the U.S., the net number of users active on Pinterest globally increased 9% as a result.
Part of the panic over losing U.S. users is that each U.S. MAU generates more revenue than an international MAU. In Q2 that was 36 cents per international MAU versus $5.08 for an American MAU. You can see why the panic over a decline in U.S. users.
However, look deeper and you’ll discover that international ARPU (Average Revenue Per User) increased a whopping 163% year-over-year. In Q3 2020, international revenue was $41 million, or 15% of Pinterest’s total revenue. In Q3 20201, international revenue had increased to $133 million. That’s nearly 22% of total revenue.
An investor looking at long-term growth potential should be very interested in those international MAU and ARPU numbers. International growth — in a market that is still far from saturation — combined with rapidly growing international ARPU is an equation for long-term growth.
Look At Those U.S. Numbers Carefully
Before setting aside the concerns about the decline in U.S. MAUs, let’s look at U.S. ARPU. That $5.08 for the last quarter was up 103% YoY. That’s not quite as impressive as the international growth rate, but it’s still triple-digit growth. To put things in perspective, in Q2 2020, Pinterest’s 96 million U.S. MAUs generated $232 million in revenue. In Q2 2021, 91 million U.S. MAUs combined for $480 million in revenue.
In other words, in both the American and international markets, Pinterest continues to get better at monetizing its user base. That means the slight slip in user engagement numbers is far from catastrophic. That’s another long-term growth catalyst for PINS stock.
Bottom Line on PINS Stock
Pinterest’s stock currently earns a B-rating in Portfolio Grader. The company has challenges, including keeping its U.S. user base from slipping further. If nothing else, further erosion there would cause short-term pain for the stock.
But the positives largely outweigh the negatives in this case. This is a company that is building momentum internationally and in monetizing users. It’s also a tech company/social media company that has largely escaped the antitrust scrutiny so many others face.
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. 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.
Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.