Pinterest, Inc Rewards Investors During Pandemic
Here we are in August and the pandemic continues to grip the world. There’s been a lot of economic damage, but there are companies that have greatly benefited.
In the high-flying social media space, the stay-at-home orders have been a godsend for companies like Pinterest, Inc (NYSE:PINS), which just set a record of $38.23 per share, well above its initial public offering (IPO) price of $19.00.
PINS stock was trading at only $10.10 during the March sell-off, up a superlative 241% to the current level. But even so, Pinterest stock is down 2.68% over the past year, so there is still upside potential.
The chart of PINS stock shows the emergence of a bullish golden cross in early June, followed by an upside trade gap, both indications of potentially stronger moves ahead for Pinterest stock.
Chart courtesy of StockCharts.com
Pinterest largely competes with Facebook, Inc. (NASDAQ:FB) and Snap Inc. (NYSE:SNAP), but offers its own unique difference.
The company’s visual discovery engine is used to post and search for visual information on topics such as recipes, home and style ideas, and travel. And during these homebound times, PINS has become increasingly popular. I expect the interest in Pinterest stock to continue even in post-COVID times.
Pinterest recorded strong growth in its key monthly active users (MAU) numbers over the last four quarters as shown in the table below. Note the strong user base in the international market. (Source: “Pinterest Q220 Earnings Report,” Pinterest, Inc, last accessed August 20, 2020.)
|Quarter||Monthly Active Users (Millions)||U.S. MAU (Millions)||International
Strong Traffic & Revenue Growth Support Bull Thesis for PINS Stock
A look at the last three years reveals the impressive revenue growth recorded by Pinterest, as revenues surpassed $1.0 billion.
|Fiscal Year||Revenue (Millions)||Growth|
(Source: “Pinterest, Inc,” MarketWatch, last accessed August 20, 2020.)
The growth is expected to continue for Pinterest at 26.6% to $1.44 billion this year, with another increase of 33.6% to $1.98 billion in 2021. (Source: “Pinterest, Inc (PINS),” Yahoo! Finance, last accessed August 20, 2020.)
But like many of the other social media stocks early on, PINS has yet to report positive earnings before interest, taxes, depreciation, and amortization (EBITDA).
|Fiscal Year||EBITDA (Millions)||Growth|
(Source: MarketWatch, op. cit.)
The company is also yet to report generally accepted accounting principles (GAAP) diluted earnings per share (EPS).
|Fiscal Year||GAAP Diluted EPS||Growth|
(Source: MarketWatch, op. cit.)
Pinterest appears set to turn the corner on achieving profitability. The company is estimated to report an adjusted $0.03 per diluted share this year. There is a high estimate of $0.15 per diluted share. (Source: Yahoo! Finance, op. cit.)
The most significant growth is expected in 2021, when PINS is estimated to make a consensus $0.21 and as high as $0.43 per diluted share.
A big plus is Pinterest’s strong working capital of $1.70 billion in cash and minimal debt of $151.28 million. (Source: Yahoo! Finance, op. cit.)
The strong revenue growth and pathway to profitability are key for Pinterest stock. PINS is driving user engagement in both domestic and international markets, which will provide bullish tailwinds.
Insiders are also jumping in, with a net 21.71 million shares of PINS stock added during the last six months. (Source: Yahoo! Finance, op. cit.)