Shares of product and idea discovery site Pinterest (NYSE:PINS) have seen a lot of ups and downs lately. A early pandemic darling, the company had its best days in the weeks prior to the December 2020 debut of vaccinations before sliding almost 50% in the last six months. PINS stock is showing high volatility, with the beta rising to 1.14 in recent days.
Along with that higher volatility measure, the platform is seeing lower user metrics. Some 24 million users left in the second quarter, as measured on a sequential basis, with an additional 10 million falling off in the third quarter.
This could be due to several reasons including the lack of interest in the website as we get back to normal. Pinterest is different from many other social media sites, it allows you to browse images and pin them, making it a little less addictive and more relaxing. Management’s Nov. 2 letter to shareholders admitted that the hit on users from the “pandemic unwind on engagement” is still to be seen.
PINS stock went from $72 last December to $55 in May and is trading at $37 today. I wrote about the stock in October when it was trading at $47 and had mentioned that it would continue to fall. However, when the stock inched closer to its 52-week low, I believed it was the lowest it could get but I was wrong. PINS stock continued to fall and might show even more volatility over the next few weeks as well.
Investors need to understand that there is more to the company than the pandemic and we should stop judging its potential and success keeping the lock-downs and virus variants in mind. Leave Covid alone and consider Pinterest as a company with great growth potential. With this in mind, let’s dig deeper into what’s working for PINS stock.
Growing E-Commerce Platform
Pinterest is not only about sharing images on the website but it has become a massive e-commerce platform. The company offers shoppable “pins,” making the process easier for buyers and sellers. It allows the sellers to upload their catalogs to the pinboard and the buyers can easily make their purchases. A lot of users choose Pinterest to look for products and then make the buying decision.
The convenience and ease of shopping has attracted a slew of merchants to the platform which is also why Shopify (NYSE:SHOP) partnered with Pinterest. It allows the merchants to launch shoppable pins with an integrated payment option. As long as the company continues to attract merchants and advertisers to the platform, it will continue to generate revenue.
A lot of other social media platforms, including Meta Platforms’ (NASDAQ:FB) Instagram, allow users to shop and sell. These companies are ramping up their efforts but Pinterest already has an early mover advantage and if it can cash in on it, there will be a huge benefit to the bottom line. It proves that there is immense potential for Pinterest to grow in this area.
Analysts See PINS Stock Upside
I am bullish on PINS stock and there are analysts who have a favorable opinion as well. Jason Bazinet, a Citi analyst has a price target of $42 on the stock with a “neutral” rating. Loop Capital analyst Rob Sanderson has a price target of $50 with a “buy” rating.
My InvestorPlace Nicolas Chahine colleague believes that the company will have a better 2022. Further, out of 19 analysts tracked by TipRanks, six have a “buy” rating and 13 have a “hold” rating, with an average price target of $52.48.
The Bottom Line
The pandemic both helped and hurt Pinterest but there is no reason to believe that all is over for the company. It can continue to grow and generate revenue. The rollout of new features makes the website very attractive for the users. The growth rate may be slow but as long as the company is growing, one cannot write it off.
There is the massive growth potential for Pinterest and the stock is trading at a discount today. Trading at a price-to-book multiple of 9.01 and price-to-sales of 10.3, it might not be this cheap for long and the revenue could soar in the future. Buy PINS stock while it is trading at a discount.
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.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.