Pinterest Is Down, But Not Out With Strong International Growth

Advertisement

PINS stock - Pinterest Is Down, But Not Out With Strong International Growth

Source: Ink Drop / shutterstock

Pinterest (NYSE:PINS) declined 3.07% in opening hours after ClearBridge Investments didn’t include it in its Mid-Cap Growth Strategy. The investment management firm cited the company’s sluggish user growth as the reason PINS stock was excluded.

Shares of Pinterest have been spiraling, losing 37% since the beginning of the year. Further, PINS stock is down 74% from its 52-week high. The correction in its share price has been primarily due to growth concerns.

There has been a steady decline in monthly active users (MAUs) in the last few quarters. Although this number has been disappointing lately, investors should account for the circumstances created by Covid-19 in earlier months. As businesses have reopened, people have spent relatively less time on indoor activities like scrolling through Pinterest.

On an optimistic note, the company’s average revenue per user (ARPU) has increased. This means more advertisers are willing to pay for being on the platform. In 2021, overall ARPU increased by an impressive 36%. This was driven by a 43% rise in the United States and an 80% increase internationally.

Going forward, the company should gain from its expansion in international markets, as there’s more room to grow. As Pinterest’s core model is based on users’ posts about things that interest them, more advertisers should be willing to put their content on the platform. Hence, growth in ARPU should sustain.

In a survey conducted by Pew Research Center, adults using Pinterest have increased to 31% in 2021 from 28% recorded in 2019. Although that is not a big change, the data suggests more people are interested in the platform. Piper Sandler’s semi-annual survey with teens also reports more young people are using Pinterest on a monthly basis.

The stock is currently trading at 24.7 times expected earnings for 2022. Considering a five-year growth forecast of 53%, PINS stock looks appealing.

My view is further supported by the consensus of 31 Wall Street analysts. It suggests a “hold” rating with an average price target of $37, which implies 59% upside potential.

On the date of publication, Sakshi Agarwalla 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. 


Article printed from InvestorPlace Media, https://investorplace.com/2022/04/pinterest-is-down-but-not-out-with-strong-international-growth/.

©2024 InvestorPlace Media, LLC