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Pinterest Stock’s Stay-at-Home Value is Fading Along with the Pandemic

The pandemic has worked in favor of many stay-at-home companies and Pinterest (NYSE:PINS) has made the most of the situation. But that’s changed and PINS stock has declined and 14% year to date.

the pinterest (PINS stock) logo on a mobile phone held by a woman
Source: Nopparat Khokthong / Shutterstock.com

The company saw a growing user base until the second quarter. However, all was not well once we saw a rise in vaccination rates and a decline in Covid-19 cases. In Q2 earnings, the company reported a dip in the active user base which led the PINS stock to slip 3.2% in the past month. 

The company is in the early stages of growth but its popularity is fading. I was of the opinion that Pinterest could monetize the audience well but its features are nothing new as compared to other social media companies.

I think it is best to avoid PINS stock for now and wait and watch how the company performs as normalcy returns.

With that in mind, let’s take a look at the investment case in Pinterest.

Not Enough Monetizing Tools to Fuel PINS Stock

The majority of Pinterest’s new monetizing tools are not very unique or innovative. These tools are similar to the ones offered by other social media platforms like Facebook (NASDAQ:FB) and it’s Instagram, Alphabet’s (NASDAQ:GOOGL) YouTube, and TikTok. These platforms have been catering to a large audience and content creators for years by allowing them to build their business and expand their reach. 

Instagram allows shopping by simply clicking on an image as compared to Pinterest which takes you to another Pinterest page from where you visit the retailer’s page to make the purchase. This friction has prompted many users to start their inspiration for shopping from Pinterest and make their purchases through Instagram, which has turned into an online market of sorts. 

There is massive competition on large platforms and they bring a similar set of shopping tools. If Pinterest wants to remain in the race, it has to innovate and offer convenient and seamless user experiences.

Looking at the decline in its user growth, Pinterest needs to work on its monetizing strategy and offer unique features on the app. If the company does not act in time, other social media giants like Instagram will take a large bite of its user base.

Decline in User Growth Will Continue 

PINS stock was buried on earnings, despite strong revenue growth and a solid balance sheet, it suffered a one-day drop of 18.2%. Investors were not happy with the drop in user base and this led to a massive fall in the stock. User growth and monetization is an important tool that measures the success of social media companies. 

With the ease of Covid-19 restrictions, Pinterest saw a decline in the user base. My InvestorPlace colleague, Larry Ramer, explains very well the fact that the delta variant is not an economic game-changer and might not help Pinterest in the near future.

In the second quarter, the company saw a 5% decline in U.S. active users, to 24 million users, to be precise. The company expects to report another decline in user growth for the next quarter; this is not good news for the investors. 

The Bottom Line On Pinterest Stock 

I think Pinterest is a solid stay-at-home stock and it garnered a larger user base only because of the pandemic. The drop in user base will continue in the next quarter and this could lead to a further decline in PINS stock. 

People will continue to step out this quarter and this will lead to a further dip in the share price. The Q3 results will likely disappoint investors who have bought the stock at a higher rate. 

I believe there are better social media stocks in the market for you to consider.

Avoid PINS stock for now. 

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2021/09/pinterest-stocks-stay-at-home-value-is-fading-along-with-the-pandemic/.

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