Pinterest Is a Coronavirus Play Whose Time Has Passed

Pinterest (NYSE:PINS) is one name that did extraordinarily well during the Covid-19 pandemic. From the start of 2020 through mid-February of this year, PINS stock rallied 378%.

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It’s not such a surprise if you think about where we were during that run-up. Schools were shut down. Many businesses were either closed or had gone remote. People suddenly had lots of time on their hands as they looked inward amid fear that they, too, could be struck by the mysterious virus.

People flocked to Pinterest’s platform in search of inspiration for their wardrobes, homes or stomachs. Others came out of pure boredom. Against that backdrop, PINS stock had its finest hours. Shares surged from below $20 in January 2020 and topped out just below $90 early this year.

But as the world began to reopen and people started returning to work and classrooms, shares tumbled. PINS stock saw its value cut in half, as it is currently trading around $45 per share. This included a sharp drop late last month after PayPal (NASDAQ:PYPL) shot down rumors that it was considering buying Pinterest.

Investors must now consider whether the pandemic’s easing means the best days are over for PINS stock. Let’s take a closer look.

Pinterest Is an “Advertiser’s Dream”…

I don’t have a Pinterest account. But I know users create online pinboards about things like fashion, photos, videos or anything else that may interest them. Pinterest monetizes its users through advertising. If you’re cruising Pinterest and see something you like, all you have to do is click, or put a “pin,” on it.

There are many products that users can buy directly off the platform, which is incredibly appealing for advertisers. In a November 2020 interview, The Motley Fool’s Daniel Sparks called Pinterest an “advertiser’s dream,” stating:

[I]f you just intuitively think about Pinterest, it’s really an advertiser’s dream, because people are there. Probably, I don’t know, my wife, at least, I see her using Pinterest, like getting ideas on shopping simultaneously. I think that a lot of people use it that way because you can literally click on it and then go buy it. It’s really an advertiser has a captive audience who’s ready to spend money. Because a lot of times, they come there to get ideas on how to decorate something or whatever.

Today, the company announced it will launch Pinterest TV on its app on Nov. 8. The new feature will be a series of live, shoppable videos focused on various areas of interest. The videos will also be available on-demand following their initial airing.

The goal is clearly to drive more e-commerce sales. But given PINS stock rose just 1.4% on the news, it doesn’t appear investors think this will be a game-changer for the company.

But People Are Losing Interest in Pinterest

Pinterest is scheduled to issue its third-quarter earnings report on Nov. 4. Analysts are expecting revenue to increase 43% year over year and adjusted earnings per share to rise 77% from a year ago. Even more important than revenue and profit growth, though, will be user growth, as that was a weak spot in the Q2 report.

For the second quarter, Pinterest beat analysts’ revenue estimates, reporting a 125% year-over-year surge to $613 million. Adjusted earnings of 25 cents per share also exceeded expectations. However, PINS stock dropped 18% in a single day following the report due primarily to the fact that the company saw a 7% drop in its monthly active users from the same quarter a year ago.

The decline in users can almost certainly be blamed on the pandemic’s easing. After all, the world in the second quarter of 2020 was a much different (and scarier) place than the world in the second quarter of 2021.

It’s safe to say Wall Street will be watching closely to see whether declining interest in the site was a one-off or a new trend.

The Bottom Line on PINS Stock

Pinterest is a no-surprises kind of social media stock. You’re not going to see its CEO hauled in front of Congress to answer for various missteps. Nor will you see it idiotically change its name in an attempt to shift the narrative on Capitol Hill.

On the other hand, you’re not going to see wickedly fast growth from PINS stock any time in the near future. In fact, it’s more likely shares will return to their April 2019 IPO price of $19 than bounce back to their nearly $90 high.

On the date of publication, Patrick Sanders 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.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.


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