By Stephen Karmazyn, BA

Published: February 12, 2017

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Stephen Karmazyn, BA
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Pinterest IPO in 2017 Is a Possibility

Pinterest IPO Could Be in the CardsPinterest IPO Could Be in the Cards

If 2017 is going to be a major year for big-tech initial public offerings (IPOs), then it’s going to need more moves from companies like Pinterest, Inc.

With the Snap Inc. IPO leading the way, many investors are hoping that Snap (which runs “Snapchat”) is the first domino to fall, and are hoping that many other leading private tech companies will take their business to the open market. That hope includes the potentially juicy Pinterest IPO.

The thing about IPOs in 2017 is that they are so uncertain at this point.

The Pinterest IPO valuation sits at about $11.0 billion after raising $1.3 billion in funding. The company boasts 150 million worldwide users, up from 100 million in September 2015. These two factors alone contribute to what many consider one of the strongest potential new tech stocks to have an IPO. (Source: “Pinterest CEO Affirms $300 Million in Revenue in 2016,” The Wall Street Journal, October 26, 2016.)

But the issue is that, like several other companies in similar positions, these businesses seem in no hurry to go public.

Pinterest CEO Ben Silbermann said that the company is “focused on growing that basic business,” at the WSJDLive 2016 global technology conference. “The business is scaling quickly.” (Source: Ibid.)

But, at the same time, Silbermann did not totally discount the idea of a Pinterest IPO in 2017, and looking at the financial records and user base of the company, it’s not unfathomable to see the company hit the open market this year.

Pinterest Revenue 2016 Figures Were Good

The social media company, which is based on a sharing board of images, is particularly popular among women, with two-thirds of users being female. Silbermann has said that the company is trying to pursue more male users, with increasing success. He said that 40% of new subscriber accounts are created by men.

And these accounts are fueling revenue growth. Silbermann affirmed reports that Pinterest revenue for 2016 reached $300.0 million, which is triple 2015’s total. Much of that revenue was generated via advertisements run on its web site and mobile app.

This all bodes well for a near-term potential IPO.

In a more recent interview in January, Silbermann once again declined to give an indication one way or the other concerning a Pinterest IPO. “We’re just right now focused on building the business,” he said. (Source: “Pinterest’s Ben Silbermann Looks Ahead,” The Wall Street Journal, January 13, 2017.)

But there are signs that the company is angling toward a Pinterest IPO in 2017. The social media app initiated a design overhaul last spring, hired a chief financial officer last fall, and has recently put more of an emphasis on revenue generation, all of which could be the foundations for an IPO filing. The $11.0-billion Pinterest valuation also puts it among some of the top private tech companies in the world.

Not to mention that the company has been in development of some potentially game-changing tech.

For instance, one of its newest features, called “Lens,” allows users to pair images on the site with objects they encounter in everyday life. For instance, you can take a photo of an outfit you like and then, through the Lens search tool, the company’s algorithm will take over and pair your image with similar ones across Pinterest. (Source: “Pinterest introduces real-world object search tool,” The Drum, February 9, 2017.)

This novel image-based search engine is great, not only for user experience, but will pair potential customers with product brands much more efficiently.

Pinterest has been looking into the possibility of releasing its platform in Spanish-speaking countries, along with its efforts to break into Japan, the U.K., and Brazil.

Both of these new developments could be huge for the company. Continuing to grow its base will be key to maintaining its high valuation, and also ensuring a valuable Pinterest IPO price per share when it does eventually go public.

Another strong foundational aspect of Pinterest that appeals to analysts and investors alike is the “strong commercial intent” demonstrated by users. What this essentially means is that those who visit Pinterest’s web site and use the app are more prone to buying products from the brands advertised, which makes sense.

After all, these are people browsing through appealing items that are often a click away from being bought online and delivered.

Couple this buying-prone user base with some other strong resources—like the large amount of metadata that the company collects on its visitors—and you have not only a number of paths to profitability, but some clear advantages over other social media rivals.

“Buyable pins,” for instance, let users purchase items they see directly, by simply clicking on the image and being transported to the payment page. The more that visual search capabilities advance, the more these features will only improve and, therefore, become more effective at completing sales online. (Source: “Should Google and Facebook Be Worried About Pinterest?” Barron’s, January 13, 2017.)

Many of the Pinterest features, in fact, sound downright futuristic, especially when looking at the ever-expanding and sophisticated image search engine algorithm.

This makes Pinterest stock a potential winning buy when it does eventually hit public markets.

What’s Next for the Possible Pinterest IPO?  

That is the $11.0-billion question. While the company was initially slated for a probable 2017 IPO filing, that is seeming less and less certain every time the CEO speaks on the topic.

That doesn’t mean there is zero possibility of the company going public this year, or even a poor chance, but it does mean that those banking on a Pinterest IPO as their big move this year might be best served to find a backup stock as a contingency plan.

Whether Pinterest files for an IPO this year or next, the company is still full of value and is in one of the more favorable tech IPO positions, even when compared to other IPOs potentially in the 2017 cohort.

While Snapchat has to fend off “Instagram’s” bald-faced attempts to copy its features, AirBnB, Inc. faces legal troubles, and Palantir Technologies’ executive is on record saying that he does not like the idea of going public, Pinterest faces none of these challenges.

Rivals are sure to emerge, and no company or stock is perfect, but Pinterest is uniquely suited to potentially be one of the hotter stock picks when it does eventually open up the public due to the strength of its tech, its spend-happy user base, and strong growth potential.