No matter how you cut it, the surrounding circumstances don’t look particularly great for social media platform Pinterest (NYSE:PINS). On a year-to-date (YTD) basis, PINS stock is down 32.4%, which is a staggeringly bad figure even compared to the dour circumstances in the market right now.
But the numbers get worse on a trailing-year basis. Down over 66%, PINS stock is suffering from a hemorrhaging — there is no other way to put it. Considering that its initial offering price was $19, even the early bird investors stand the possibility of taking it on the chin.
However, if you take a look at the trailing week since the close of the Mar. 14 session, PINS stock only declined by 1%. While losses usually aren’t something to celebrate, in this case, the optimists will take what they can. Under the present circumstances, Pinterest believers are focused on damage control, much like an EMT dealing with a traumatic event.
The number one priority is stabilization as the patient is rushed to the hospital. From there, the trauma surgeons will see what they can do. But is there any hope for PINS stock?
Maybe. As I mentioned in my long-form analysis for Pinterest, the majority of its user base are women, offering an interesting benefit.
“Per research listed by Cambridge University Press, women are more likely to avoid radical right ideologies. Logically, with female users representing the bulk of Pinterest’s engagement dynamics, it stands to reason that the platform will sidestep much of the potential for explosively vituperative commentary that has so agonized other social media outlets.
With social media platforms vulnerable to exacerbating whatever sensibilities, a women-centric platform is positive for the reason mentioned above.
Longer-Term Issues May Haunt PINS Stock
Another positive that may come into the picture is the volatility itself. Again, with PINS stock taking off about 70% of its market value, it does look attractive strictly in that context. With it being close to its initial offering price, Pinterest may be a time capsule opportunity.
However, if you’d like my gut feeling on this matter — and that is all it is, an opinion — you’ll probably want to be super-cautious on PINS stock.
Principally, I’m extremely worried about the broader impact of soaring consumer inflation. For one thing, rising prices aren’t just limited to a particular segment of the economy that people can avoid. As an example, I personally am not freaking out over $7 gasoline because my driving habits have declined almost precipitously in the new normal.
But higher gas prices impact product categories that require transportation from one place to another; of course, this means everything. So, with unavoidable inflation in necessary goods and services like food, water, utilities, etc., consumers will clamp down on discretionary spending.
True, Pinterest users can pin away. But from what I gather, most folks pin content that is appealing. I don’t think people are interested in pinning pictures of toilet paper or toothbrushes. Thus, the incentive to pin — due to deteriorating consumer sentiment — is getting limited, which could hurt PINS stock.
What’s worse, inflation itself is a tax on working people. And by that, I mean people who earn a paycheck or conduct a business, which is most folks under a certain age. This tax has to be paid because dovish monetary policies would not make sense if the ratio between money supply and wages simply went higher by the same multiple.
Kill Inflation, Then Let’s Talk PINS Stock
Unless I’m completely misreading the business, Pinterest caters largely to discretionary spending desires: what makeup brands people want, the vacations they’re planning, the perfect dress, that kind of thing. Those thoughts are likely going to be put on hold due to this tax called inflation.
Why investors should worry about PINS stock under this framework is that wages will not keep up with rising costs. I mean, why would they? Companies do everything they can to squeeze productivity out of their laborers while minimizing their compensation. Essentially, businesses have no choice to do this. They will only share the wealth once it is sustainable to do so.
But with most Americans likely to cut their spending, as well, revenue and earnings will take a hit across the board. Therefore, I don’t think people should take a hefty position on PINS stock at this moment.
Kill inflation, then we can talk about Pinterest. Until then, keep the powder keg dry.
On the date of publication, Josh Enomoto 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.
