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Pinterest’s 20% Drop Makes It An Attractive Buy

By Investing.com (Haris Anwar/Investing.com)Stock MarketsApr 01, 2021 09:27AM ET
www.investing.com/analysis/pinterests-20-drop-makes-it-an-attractive-buy-200570645
Pinterest’s 20% Drop Makes It An Attractive Buy
By Investing.com (Haris Anwar/Investing.com)   |  Apr 01, 2021 09:27AM ET
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There is no dearth of technology stocks which immensely benefited during the coronavirus pandemic as the use of online channels to buy, entertain and communicate exploded. As the advanced economies get ready to reopen after a tumultuous year, the big challenge for growth investors is to find stocks that could continue to thrive in the post-pandemic world.

In this context, the San Francisco-based Pinterest (NYSE:PINS) is offering an attractive buying opportunity after its recent weakness. 

The shares of the digital scrapbooking and search company were trading about 20% lower on Wednesday from their February record high. This sluggish phase comes as investors shun high-growth stocks on concerns that their values have become too expensive and their growth will slow after the economic reopening. Pinterest stock more than tripled in 2020. 

Pinterest Weekly Chart.
Pinterest Weekly Chart.

Despite this uncertain environment for growth stocks, there are some solid reasons that make Pinterest a unique player in the social media domain. Its platform serves as a digital bulletin board for pictures and ideas for segments like fashion, weddings, recipes and more, allowing users to scroll through a feed of “pins” that contain images or videos. 

Users can then save the pins to customizable boards to curate ideas for anything from vacation plans to dinner recipes or holiday shopping lists. This structure makes Pinterest very different from that of other social media companies as users come to the site with an intent to make a purchase.

Expanding User Base

In recent years, Pinterest has invested in making its platform more e-commerce friendly. Its pins are now “shoppable,” meaning users can click on an item—or a similar recommendation—and purchase it through a brand’s website. 

Last May, Pinterest and Shopify (NYSE:SHOP) launched a new channel that allows merchants to turn their store products into “Product Pins,” as part of the company’s push to monetize its large user base of small- and medium-size businesses.

Due to these initiatives, Pinterest has seen user traffic and engagement grow to record highs during the pandemic. Global monthly active users jumped to 459 million by the end of fourth-quarter, up 37% from a year earlier. That surge in traffic was responsible for a 76% increase in Q4 sales to $706 million. The company estimated revenue will increase in the “low 70% range” in the period ending in March.

Going forward, advertisers could see durable value in Pinterest due to its very different user base. Women, for example, make up more than 60% of its platform globally, making it quite attractive for digital advertisers who are targeting female audiences. The number of Pinners under age 25 grew twice as fast as Pinners 25 and over. This segment is using Pinterest to search fashion inspiration, home decor ideas and study tips.  

PINS’ improving financial and user metrics have no doubt played a big role in the stock’s powerful rally during the pandemic, but the regulatory threat that the big social media companies are facing is another big positive for small players like Pinterest. 

An app with a clear and defined audience with little room for misuse is in a much better shape to withstand potential regulatory changes globally than the behemoth like Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL), the social media companies that some politicians want to break up.

The majority of 31 Wall Street analysts are optimistic about the company’s growth potential, with 21 recommending to buy PINS. The average analyst price target of $90.02 implies that PINS has around 22% upside potential over the next 12 months

Bottom Line

Pinterest is in its early stage of growth with a lot of room to expand its average revenue per user (ARPU), helped by its unique appeal and its attractive demographics. This combination makes its stock a good long-term buy for investors seeking to benefit from its current weakness.

Pinterest’s 20% Drop Makes It An Attractive Buy
 

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Pinterest’s 20% Drop Makes It An Attractive Buy

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Comments (11)
Linda Smith
Linda Smith Apr 04, 2021 5:40AM ET
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if you want to no more about investment or invest your in bitcoin currency
James Kiz
James Kiz Apr 03, 2021 8:32PM ET
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if you want to no more about investment or invest your in bitcoin currency
Dave Jones
Dave Jones Apr 02, 2021 3:39PM ET
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LMAO! How is it worth anything?
Billy Bilnaad
Billy Bilnaad Apr 01, 2021 4:59PM ET
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Agree this is a $100+ stock
Sam Iam
Sam Iam Apr 01, 2021 12:00PM ET
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For chartists PINS made a head-and-shoulders top from January through March. Crashed from the February high of 89.90 to the March low of 60.33. Broke above the left shoulder today and neckline. On the chart above someone drew the neckline at 74.03.
Russell Amerio
Russell Amerio Apr 01, 2021 11:37AM ET
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April Fool's!!!! This is a fantastic joke!!
Dave Jones
Dave Jones Apr 01, 2021 11:37AM ET
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🤣
Sohanur Rahman
Sohanur Rahman Apr 01, 2021 11:33AM ET
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Ric chai
Ric chai Apr 01, 2021 11:33AM ET
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Another jittery of bond yield will possibly see it suffers another big drop
Scott C Blakley
Scott C Blakley Apr 01, 2021 11:33AM ET
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Dude, take a look at the gaps that appeared today. Wait for a larger pullback
Scott C Blakley
Scott C Blakley Apr 01, 2021 11:33AM ET
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Excuse me, the 10 day not today
Shafhat Ali
Shafhat Ali Apr 01, 2021 11:32AM ET
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thanks
Mert Karaata
Mert Karaata Apr 01, 2021 7:20AM ET
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A very nice analysis, thank you..
 
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