During the onset of the Covid-19 pandemic, Pinterest (NYSE:PINS) helped many people relieve the boredom and anxiety caused by the lockdowns. This surge in popularity provided a massive tailwind for PINS stock, which rose 790% from its pandemic low to its all-time high just below $90.
Lockdowns didn’t last, though, and the social media stock frenzy cooled in 2021. On top of that, there was a “tech wreck” in late 2021 and early 2022. Investors dumped their shares of PINS stock, which has plummeted more than 70% from its high made in February 2021.
Their panic selling may just turn out to be a hasty decision. A recent earnings release suggests the company is moving in the right direction based on multiple financial metrics. Granted, there’s a data point or two that will bother some people. But this shouldn’t be enough to shake informed investors out of PINS stock.
A Closer Look at PINS Stock
At $25 and change, PINS stock is trading around the same price as it was in July 2020. Bulls are likely eyeing the dip. A move back to the all-time high would yield a nearly 250% return. Even a move back to the pre-tech-wreck high in the mid-$60s would mean a 150%-plus gain.
A sensible strategy would be to scale into PINS stock, purchasing a few shares in the $20s and then adding a few more if the stock goes into the teens.
Keep in mind that even during the Armageddon scenario of March 2020, shares approached the $10 level but then bounced right back up. It just goes to show that value-focused investors should lean into the volatility, not shy away from it.
First, the (Not So) Bad News
On Wall Street and elsewhere, pessimists will always find something to complain about. And in almost every earnings release, there will be at least one data point that’s less than ideal.
Such was the case with Pinterest’s highly anticipated fourth-quarter 2021 financial results, which were released on Feb. 3. Critics chose to focus on Pinterest’s lack of user growth. Pinterest’s global monthly active users (MAUs) fell 6% year over year to 431 million. Meanwhile, monthly active users in the United States declined 12% from a year ago to 86 million.
That’s disappointing, as monthly active users are an important metric for social media companies. On the other hand, the data indicates that Pinterest did an excellent job of monetizing the users it had. Specifically, Pinterest’s global average revenue per user increased 23% year over year. Furthermore, the company’s U.S. average revenue per user improved 25% from the same quarter a year ago.
Perhaps, then, the seemingly bad news about Pinterest’s declining user count wasn’t so bad after all. Besides, there are other data points to counterbalance the lack of user growth.
Marking Milestones
Pinterest CEO Ben Silbermann observed that the company achieved a couple of milestones during 2021’s fourth quarter.
“I’m proud to say that for the first time, we surpassed $2 billion in revenue for the year — growing 52% over the previous year — and reached our first full year of GAAP profitability,” the CEO stated.
It’s also encouraging that Pinterest’s Q4 revenue rose 20% year over year to $846.7 million. This was comfortably above the $827 million consensus estimate and was driven by strong advertising revenue.
Turning to the bottom-line results, Pinterest’s Q4 adjusted earnings (excluding items) came to 49 cents per share, exceeding analysts’ estimate of 45 cents per share.
The Bottom Line on PINS Stock
As you can see, Pinterest exceeded Wall Street’s expectations in a number of important areas. The company is successfully monetizing its users and posting strong top- and bottom-line results.
Moreover, attaining GAAP profitability in 2021 is a significant achievement for Pinterest. This suggests that PINS stock deserves to be higher than its current price.
Don’t listen to the skeptics and the naysayers. Soon enough, there should be plenty of interest in Pinterest, making a rally in PINS stock almost inevitable.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
