Pay Close Attention to Pinterest’s ARPU When It Reports Earnings

  • Pinterest (PINS) stock is down nearly 70% from last year’s rumored PayPal (PYPL) offer price.
  • Consumer sites will likely bounce back only after technology cuts business costs and inflation.
  • Investors are hoping for an ARPU surprise.
Pinterest logo. PINS stock.

Source: Ink Drop / shutterstock

Pinterest (NYSE:PINS) stock has had a rough 2022. Shares are down 40% so far this year and show little sign of rising. On April 19, Pinterest opened at $22/share, a market cap of $14.5 billion on 2021 revenue of nearly $2.6 billion.

Last time I looked at it, it was with hope that peace would bring a rebound. That seems a faint hope now. Pinterest is looking for the next growth stock wave but the growth market seems turbulent. Finding the company’s ultimate value looks harder than ever.

Just six months after Paypal (NASDAQ:PYPL) seemed ready to buy it at $70/share, you can get Pinterest at 69% off.

That looks like a bargain, but here’s why you may want to wait before buying.

PINS Pinterest $21.62

The Earnings Outlook

In technology, companies that serve to business usually bounce well ahead of consumer stocks. That’s because tech offers to lower other costs, cutting losses or securing profits. No matter how good a consumer offering, it still needs consumers.

Pinterest has two problems. First, it’s not making money. If I felt sure it would make over $1/share this year, which is the consensus among analysts, I’d say buy it.

Unfortunately, the first quarter looks like a washout. The earnings whisper is for a loss of 11 cents per share on sales of $570 million.

Raising ARPU

What could change my view is a surprise on average revenue per user (ARPU). It’s a problem I identified last August, and it was still a problem in the December quarter, when the average revenue from each international visitor was 57 cents.  Pinterest is addressing it, but it takes more time to build commercial infrastructure than a website.

Pinterest was originally a customer-to-customer site, a hobbyists’ treasure hunt. Its user base is skewed to women with time on their hands. A $1.2 million fund aimed at “under-represented creators” seems like a logical move. New pins for ideas, rather than products, a Watch tab for video content, and allowing the sharing of data with sites like TikTok will all help.

Pinterest is also trying to change the skew, bringing in male shoppers, but this will take time to develop. Bringing businesses to the platform through the WordPress plug-in WooCommerce should also help, especially in international markets where it could plug-in to existing infrastructure.

If Pinterest can show a surprise on ARPU when it reports in a week, I’d be a buyer.

Pounding the Table

People who like to “buy the dip” without understanding why the dip happened are telling investors to buy Pinterest now.

It’s beaten down, so it must come up, they argue. It’s cheap at under six times sales. Getting in ahead of the crowd could set you up for life.

But until there’s evidence the business issues have been addressed the stock can’t rise. With economic uncertainty growing, consumers tightening their belts in the face of inflation, analysts have grown skeptical. Only seven of the 24 analysts following Pinterest reported by TipRanks now have the buy light lit.

The Bottom Line

If you’re stuck in Pinterest stock, this is not a good time to take a loss.

But if you have money ready to invest, there are better opportunities out there.

Pinterest is addressing its engagement problems, but the solutions will take time to show up on the bottom line. You can wait until after earnings to gauge how well management is doing.

If you believe inflation is transitory and a recession is unlikely, you won’t lose a lot of money buying Pinterest now. I’m going to put a pin in it and wait for evidence of a turnaround before buying.

On the date of publication, Dana Blankenhorn held no positions in companies 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, or subscribe to his Substack.


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