Pinterest (NASDAQ:PINS) stock may soon benefit from one of Wall Street’s oldest adages. Buy low, sell high.
![the pinterest (PINS stock) logo on a mobile phone held by a woman](https://investorplace.com/wp-content/plugins/lazy-load/images/1x1.trans.gif)
It’s when growth stocks are out of favor that you want to buy growth stocks. Growth stocks fell out of favor in 2021, and PINS stock fell harder than most.
Shares that were selling at nearly $86 in February and trade today at about $34.
If you bought two years ago, just before the COVID pandemic started, you’re still in the money, up 64%. If you bought a year ago, you’re down almost that much.
The company is still growing on the top line, with $827 million of revenue expected for the December quarter, against $705 million a year ago. The company is also continuing to earn money.
The problem is it’s earning less money on more revenue, and that requires an explanation.
A Closer Look at PINS Stock
Pinterest is a social shopping site built around “pins,” information and offers users can collect and follow.
It is designed to appeal mostly to women, and it does. About 77% of users are women, and 38% are 50-64, a tough demographic for many sites to get.
Pinterest’s business problem is its international operation. Users outside the U.S. were worth just 36 cents each in the second quarter of last year.
Americans shopped more and were worth $5.08/each to the site.
It’s easy for a site to be seen outside the U.S., but drawing shoppers takes infrastructure. Pinterest management focused on extending in-app shopping features in Europe and Latin America late last year. They said they were focused on monetization.
While the problems were real, the reaction was super-sized because the market’s fashions changed.
Pinterest earned just $94 million, 14 cents/share, during the third quarter of 2021. Investors wanted more just as it delivered less.
Comeback Expected
While analysts who follow the fashion are still dumping on PINS stock, bargain hunters have started nibbling on it.
The bullish case is that supply bottlenecks will ease and advertisers will come back this year.
The third-quarter number that stood out for bearish analysts was Pinterest’s total user base, which was up just 1% to 444 million. The fourth-quarter number is also expected to be flat.
But slowing user growth was intentional according to the bull case. The turnaround may have already begun.
PINS stock is expected to earn 30 cents per share in the December quarter, twice September’s number, on revenue, 17% ahead of last year. Analysts also expect revenue growth of 25% in 2022.
Another bullish sign is the launch of Pinterest TV, an online version of the Home Shopping Network.
Our Patrick Sanders is among those who think this might provide some momentum.
None of the 20 analysts following Pinterest at Tipranks has said sell yet. But most are now in the wishy-washy “hold” camp. This makes their average price target of $51.74, almost 60% ahead of where it traded January 10, hard to understand.
The Bottom Line
The big trick on the Internet is always turning engagement into commerce.
This makes February 4 a big day for Pinterest. The December quarter will show whether its efforts are succeeding. If it beats estimates the stock could fly.
Most retailers now admit they had a great Christmas in 2021. Consumers had more money than expected, and they spent it. I think you can speculate right now on Pinterest picking up its share of that.
But dig into the details of that next earnings report. How much international growth was there? What is management saying about Pinterest TV? If you do buy now, be prepared to either sell or double down very soon.
On the date of publication, Dana Blankenhorn held no positions in any company mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn.