Pinterest, Inc. (PINS) is a leading social media platform that provides a visual discovery engine based on people’s tastes and preferences. The company’s "visual search" function allows users to search for elements in images and guide them to similar content within PINS' database.
With nearly all public gatherings now verboten due to COVID-19 infection risks, and with movie theaters closed and restaurant dining problematic, stuck-at-home consumers have been spending more time online, seeking out new ways to connect and share their ideas on social media platforms.
Moreover, with digital advertising proving to be quite resilient during this period, PINS’ visual search platform has been gradually monetizing its network via merchant ads and business accounts. We think the pandemic should continue to add more users to the company’s platform as people continue to seek means to stay connected.
PINS’ has strengthened its ad platform and the company’s user-base in the international markets has grown significantly since the onset of the pandemic. The stock has gained 279.7% over the past year. This impressive performance combined with several other factors has helped PINS earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates PINS:
Trade Grade: A
PINS is currently trading above its 50-day and 200-day moving averages of $60.43 and $34.19, respectively, indicating that the stock is in an uptrend. Also, the stock gained 90.8% over the past three months, reflecting solid short-term bullishness.
PINS’s revenue has increased 58.2% year-over-year to $442.62 million in the third quarter ended September 30, 2020. The increase in revenue was primarily attributable to the significant increase in the company’s global monthly active users. Adjusted EBITDA has risen to $93.04 million.
The company recently launched a new suite of merchant tools to help retailers reach customers during the holiday season. This should help the company generate more sales, while creating a richer experience that inspires customers to shop. The company has also launched an iOS widget to cater to a growing number of users that are looking for daily inspiration from their home screen.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, PINS is well positioned. The stock is currently trading just 4.2% below its 52-week high of $72.88, which it hit on December 11. This can be attributed to recovering advertiser demand as well as positive returns from investments in advertiser products and international expansion.
Peer Grade: B
Facebook, Inc. (FB) and Twitter, Inc. (TWTR) are some of PINS’ peers. While PINS gained 279.7% over the past year, FB and TWTR returned 32.2% and 70.1%, respectively, over this period.
Industry Rank: A
Internet-enabled products and services have experienced a big spike in demand across the globe thanks to the pandemic. With many users sheltering in place and spending more time on social media platforms, the demand for image and video sharing applications has gone up significantly. Also, the second wave of COVID-19 is making people rely more on digital platforms, which bodes well for the industry.
Overall POWR Rating: A (Strong Buy)
PINS is rated “Strong Buy” due to its impressive financials, short- and long-term bullishness, solid price momentum, and underlying industry strength, as determined by the four components of our overall POWR Rating.
PINS is well positioned to soar in the upcoming months despite gaining 279.7% over the past year. The coronavirus pandemic has hastened the development and popularity of new live streaming, image sharing, and other visual features on social networks. With consumers spending more time at home amid a second wave, social media usage should continue to increase. This should provide a substantial boost to engagement on PINS’s platforms.
The consensus EPS estimate of $0.32 for the current quarter ending December 31, 2020 indicates a 166.7% improvement year-over-year. Moreover, PINS has an impressive earnings surprise history, with the company beating consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $642.74 million for the current quarter indicates a 60.7% increase from the same period last year.
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PINS shares were trading at $70.10 per share on Tuesday morning, up $0.25 (+0.36%). Year-to-date, PINS has gained 276.07%, versus a 15.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.Is Pinterest a Social Media Stock Worth Adding to Your Portfolio? appeared first on StockNews.com