Run From Pinterest Stock… Unless You Like Buying Growth Stocks With Massive Upside

During the height of the pandemic, Pinterest (NYSE:PINS) grew into one of the hottest social media apps. As governments restricted outside activities, consumers increased their time in digital spaces. But as mass-produced vaccines hit markets, folks opened their doors to the world.

the pinterest (PINS stock) logo on a mobile phone held by a woman
Source: Nopparat Khokthong /

The result? Pinterest’s pandemic-based monthly active user (MAU) growth stalled Stateside. Take the social media company’s second-quarter earnings report: user growth slowed by 5%. The stock price of PINS is plunging, of course, with good reason.

But here’s the million-dollar question: Should you buy Pinterest or is PINS a falling knife?

Before we make our investment recommendation, let’s return to Pinterest’s Q2 earnings report:

The backstory here sets the stage. Up until now, Pinterest’s U.S. MAUs pulled off several quarters of double-digit growth. The print shows many quarters of 10 million new users adds against their year-ago periods.

In Q2, the story takes a downward spiral. Pinterest reported U.S. user losses of over 20 million users. Through July 27, while facing “engagement headwinds,” Pinterest’s U.S. MAUs plunged by 7%. Global MAUs, though, grew by 5% year-over-year.

So what gives? Is this a bearish trend suggesting the best is now behind PINS stock? Or is it a minor setback disguising a massive buying opportunity? There’s no doubt in my mind that it’s the latter. Ockam’s razor — The simplest explanation is often the best one.

With lockdowns, users spent countless hours being creative on Pinterest. With vaccinations, users unleashed their pent-up demand by venturing into the world. Pinterest’s slowdown in user growth spooked investors, who sold PINS stock to the tune of 18%.

We’re not worried about this Pinterest stock selloff, which is a decision backed by data. We’ll continue to hold PINS for its durable long-term potential.

Long-Term Potential for PINS Stock

In 2020, Pinterest had a huge pull-forward of demand. That’s showing up now in its slower-than-normal 2021 numbers.

But the long-term user growth trend here remains healthy. We remain optimistic that Pinterest will get back on track soon enough.

By 2022, expect the social media company to add about 50 million new users yearly. That’s doable, considering Pinterest’s history of user-growth outperformance.

I have plenty of reasons to be bullish PINS stock in my premium investing newsletter, Innovation Investor. But the main driver I’ll list here should be enough to highlight just how much of a bargain this rout is:

Should You Buy PINS Stock: We’re still bullish on management’s pivot toward publishing tools for content creators. Pinterest’s business model depends on engagement. Its initiatives here will create a stickier user base. And app users will heavily engage with creatives on Pinterest’s platform. Some users will use Pinterest for one-off events, sure; such as planning weddings, redesigning homes or planning parties. But regular usage on the social app should increase in value. Just don’t expect a repeat occurrence of the pull-forward dynamic Pinterest just experienced.

On balance, where does that leave us with regard to buying Pinterest? Let me knock the cobwebs out of my brain with a quick summary:

My concession: PINS stock deserves a beating.

My caveat: PINS stock doesn’t deserve to trade roughly 20% lower. That’s purely overdone.

My recommendation: We’re staying the course with PINS stock. If you need a reasonably valued, highly engaged social media stock in your portfolio, you could do a lot worse than buying Pinterest’s stock.

Many of the stocks I cover in my premium newsletter advisory service, Innovation Investor, are as exciting or more exciting than PINS stock.

In fact, I have over 50 innovative hypergrowth stocks, each of which corresponds to a specific emerging megatrend, that could score investors Amazon-like returns over the next months and years.

By subscribing today, you’ll also gain access to a number of my special research reports, including reports on 3 World-Changing AI Stocks to Buy7 Hyperscale Stocks to Buy in 2021, and my cornerstone investment guide, The VC Insider’s Millionaire Playbook.

What’s more, you’ll have complete access to each company I add to our “Focused Portfolio,” which includes stocks like the world’s most exciting autonomous vehicle startup, a world-class “Digitainment” stock creating the building blocks of the metaverse, a company that we fully believe is the “Tesla killer,” and many more companies comprising trends in the metaverse, augmented reality, sustainability, and so much more.

To get started with your free stock pick (one that I consider to be my top stock pick for massive wealth-generation, click here. All you have to do is watch my first-ever Exponential Growth Summit where I reveal the name, ticker symbol, and key details of this paradigm-shifting company.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s the theme of his premiere technology-focused service, Innovation Investor. To see Luke’s entire lineup of innovative cutting-edge stocks, become a subscriber of Innovation Investor today.

Article printed from InvestorPlace Media,

©2022 InvestorPlace Media, LLC