February 23

Is Pinterest stock worth a buy now?

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The popularity of Pinterest seems to be driving up its value and share price in recent times. Even Microsoft tried to acquire the company (like what they did for TikTok) but the deal was quickly ‘shot down’ before it even started.

So, what is all the hype about Pinterest stock? Is it still a bargain despite the massive bull run?

We are about to find out here…

About Pinterest – Long growth for MAUs

For starters, the platform allows users to “pin” items of interest online to a virtual corkboard (like a bookmark). This helps to inspire and motivate them, and act as a catalyst to continue their passion projects like cooking, kneading or check out renovation ideas etc.

As Pinterest’s popularity takes off, its numbers have been accelerating too. For its FY2020 revenue, it shot up 48% year over year to $1.69 billion, while its global user base climbed by more than 100 million to 459 million.

For comparison, at the end of 2020, Facebook had 2.7 billion (MAUs) while Instagram and Twitter had over 1 billion MAUs and 330 million MAUs respectively. YouTube recorded 2 billion MAUs in the same year.

This means that Pinterest had surpassed Twitter’s MAU numbers but still have room for growth to be like the next FB or Youtube.

Niche User interests = High, Growing Revenues

An attractive platform for users from various backgrounds, Pinterest has evolved into a lucrative niche for advertisers. This correlates to its high revenues.

Pinterest’s busy user interface lets “pinners” discover a host of ideas – ranging from travel tips, recipes, hairstyles to home décor, and more. This sets it apart from peers, earning it the nickname the “anti-social media” company.

Because users can make purchases at the site and simultaneously create their exclusive pages for others to follow, Pinterest is the quintessential online business hub.

As a result, Pinterest’s average revenue per user (ARPU) increased both in the United States and internationally.

Pinterest’s improvement tactics

Pinterest has been refining its offerings, especially to the advertisers by giving them access to a variety of self-serve tools.

Newer advertisement formats are being introduced for improving marketing reach and enhancing systems of tapping conversions.

The management has also stated that the company’s growth would be driven by more investments in shopping ads, conversion, automation as well as international sales coverage.

Is Pinterest stock worth a buy now?

Data from a market survey revealed that 9 out of 10 Pinterest users engage in some sort of product research on the app. This stats is crucial because they would be more prone to engage in active shopping.

And this is what will drive more business creators (see this page) and in turn, evolve Pinterest into a virtuous cycle like TikTok and IG.

The clearest sign that Pinterest still has a lot of monetization upside is its average revenue per user (ARPU).

In the fourth quarter, ARPU was $1.57, up 29% from the year before (Facebook posted ARPU of $10.14 in the same period, nearly seven times as high.) As Pinterest introduces more advertising products and builds its ad base, ARPU should naturally move higher.

According to Fool.com, the company has only just begun monetizing its international business, where the vast majority of its users are, giving it a long runway of growth outside the U.S.

In short, Pinterest has a good market positioning and a long runway to grow as it evolves from a social media platform into a thriving ad-tech giant.

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