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Is Pinterest The Best Social Media Play For Investors Right Now?

Pinterest is a social media company that does not get as much love from investors as others. However, it is more attractive as time goes on.

The likes of Facebook, Twitter, and Snapchat tend to dominate the conversation when it comes to publicly-traded social media companies and they all currently have a larger user base than Pinterest (NYSE: PINS). 

However, Pinterest stands out as it gives users the ability to discover and save images and videos relating to their interests to their pinboards, allowing people to build up their catalogs of ideas. This includes the likes of home renovation projects, style, and recipes. It brings something a bit different to the table and its popularity is on the rise.

A strong finish to 2020

At the start of February, Pinterest reported its strong Q4 results for 2020. These figures showcase how the company is increasingly used as an advertising platform, as well as becoming more popular among users.

During the final quarter, monthly active users increased 37%, a similar growth rate as the previous two quarters. Along with the user growth came a 29% rise in average revenue per user (ARPU). Pinterest has become better and better at monetizing its offering with this improvement being its biggest rise since Q3 2018.

Revenue exploded by 76% year-on-year up to $706 million. The company also had a profit of $208 million for the period, compared to a net loss of $128 million in Q4 2019. In 2020, more than 100 million new monthly active users started using the platform, which was a record for Pinterest. It now has about 450 million active users across the globe.

No antitrust issues

In recent years, a lot has been made about antitrust and privacy concerns at companies like Facebook and Alphabet. Various scandals, inquiries, and media reports have led to people having concerns about their usage of these types of platforms. There are calls to break up giants such as Facebook as a result of their extensive reach and control.

Pinterest has not become embroiled in any of these antitrust or privacy scandals. Instead, it has been investing in different ways to combat the privacy concerns users might have. As a result, users have not really expressed any concerns about privacy or antitrust issues due to the seemingly transparent nature of how it manages data.

The other bull cases for Pinterest

Over the course of the past year, Pinterest’s share price has risen from around $10 to $80, with more seemingly being left in the tank if results keep trending upwards.

The platform is still only at the beginning of its global expansion and is putting more of an emphasis on its advertising offering. As revenue and profits grow as a result of this expansion, the share price for the social media company is likely to grow and grow.

At the moment, its monthly active user base is lower than 500 million, with the major social media platforms having more than a billion monthly users. Therefore, the scope for growth is significant. It has a standout value proposition as a platform that provides users with visual discovery capabilities in a digital space.

Many major retailers like IKEA have uploaded their entire retail catalogs to Pinterest, leveraging the shoppable pins feature. Pinterest also has a partnership with Shopify to allow merchants of all sizes to quickly integrate their products onto the platform. As a result of the intention-focused user base at Pinterest and the integrated shoppable features, the company is likely to get closer to the $10+ ARPUs seen with bigger social media companies in the coming years. 

Going forward, it looks like Pinterest will be able to continue with its user and revenue growth, while still increasing its average revenue per user. While share price growth likely won’t be very explosive in the short-term, it looks like a viable investment when taking a longer-term horizon.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here

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