Pinterest (NYSE:PINS) stock continues its steep decline from its 2021 highs. At the time of this writing, the stock is down 73% from its 52-week high. This is despite revenue in the last quarter being up 111% from the same period before the pandemic. With that said, Pinterest gives investors a mixed range of possible outcomes that makes it a hold at this time.
The reason I emphasize the word “before” is because Pinterest is commonly thought of as a comet that flashed. In other words, it flashed brightly across the investment landscape due to having a captive audience during the pandemic. But now that pandemic restrictions are waning, if not removed altogether, the company has lost a key catalyst for growth. The company’s monthly active user base (MAUs) is declining.
The revenue number makes that a tricky plot to follow. In the social media realm, a decline in MAUs usually means a decline in revenue. But that hasn’t been the case with Pinterest. In fact, the company is showing strong growth in its average revenue per user (ARPU). The headline 36% growth in ARPU is impressive. However, a deeper dive shows that the ARPU growth internationally was 80%. The significance in that is that international growth is likely to be where the company’s growth will come from.
And further complicating the story is that the company is, to date, not having much difficulty getting companies to advertise on its platform. Part of this is because, advertisers know that when users are getting on the platform, they are highly engaged. That lessens concern over declining MAUs.
If it sounds like I’m talking about both sides of my mouth, it’s probably because I am. So you won’t be surprised to know that I’m staying away from Pinterest stock. Analysts give the stock a mixed picture as well. The consensus rating is a “Hold,” but the 12-month price target shows an upside of over 80%. If you’re considering taking a position in PINS stock, you would do well to at least wait until the company reports earnings in late April.
On the date of publication, Chris Markoch 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.
