Pinterest (pinsAnd Financial) is the world’s 14th largest social media network with a platform designed to inspire, engage, and empower the visual shopping experience. It was one of the main beneficiaries of the “stay at home” environment during the start of the pandemic, as people searched for home decor and baking ideas on the platform.
The company caught my attention recently when it reported its earnings results for the first quarter of 2022. Revenues jumped, earnings jumped and so did its stock price, making a slight rebound after more than a year of corrections from Covid-bubble highs.
In 2021, the stock may have struggled with higher inflation, higher interest rates, and a stock growth correction, but I think after earnings and revenue in the first quarter, the stock could be ready to recover. Here’s why.
business model
Pinterest is the 14th largest social network in the world and has 433 million monthly active users according to first quarter results, which is very similar to Twitter (TWTRAnd Financial). The company had a significant increase in users during the shutdowns in 2020, but its MAUs were down 9% year-over-year in the last quarter.
Pinterest caters to the majority of females (60%) who are looking to get inspired and get ideas in areas such as home décor, baking, travel, fashion, art and much more. Users do this by searching on the platform and “pinning” different images or video pins to their own or other boards. Personally, I think the platform is better characterized as a “visual search engine” rather than a social network.
Pinterest is also a positive place with 8 out of 10 users saying the platform makes them feel positive. Eighty-five percent of Pinners also use Pinterest to plan new projects, and the platform generally serves those early in their buyer journey.
Pinterest recently launched the Try-ON augmented reality (AR) home décor feature, which enables users to use the Pinterest camera to see a graphic representation of furniture in their living space, through the power of augmented reality. The Try-ON feature is also useful for purchasing cosmetics such as lipstick, eye shadow, etc. According to Pinterest, users are five times more likely to buy something if they can try it out in augmented reality. Searches for AR experience pins increased by an astonishing 126% in 2021. And 75 percent of weekly Pinterest users say they “always shop” or “love to shop,” making the platform attractive to advertisers. Pinterest catalog uploads doubled globally in 2021, and in international markets it rose more than 400%.
In the first quarter, the company highlighted its video idea that Pins grew 15 times year over year and is looking to further accelerate this with the acquisition of Vochi, a video editing app.
They also launched a Pinterest API for shopping, which allows product detail pages to include real-time pricing and product availability.
Pinterest runs on “Your Shop”, a personalized shopping page powered by a “taste-driven” algorithm.
Additionally, they have a WooCommerce partnership that allows for a smoother checkout experience. Personally, I think these are all smart moves through the platform and that can significantly increase ARPU.
profits win
In Pinterest’s first-quarter earnings results for 2022, they report that they beat revenue and EPS estimates despite lower user growth. Revenue was $575 million versus $573 million expected, while earnings per share were 10 cents on an adjusted basis versus 4 cents expected.
Globally active users are down 9% to 433 million compared to the same period a year ago. The drop in users was not surprising as the company experienced explosive growth in 2020. Global average revenue per user (ARPU) was $1.33, up 28% from the previous year and above Wall Street estimates of $1.31. The company’s GAAP net loss shrank to $5 million in the first quarter, down from $22 million in the prior year quarter. Ebitda’s adjusted income is $77 million.
evaluation
In terms of valuation, the GF Value Chart, a unique estimate of intrinsic value from GuruFocus, rates the stock as significantly undervalued after a significant pullback.
The company’s price-to-sales ratio is also the lowest since the pandemic lows in March 2020 at just 5.3.
Shares are trading at one of the lowest sales price ratios compared to other social media companies such as Snap (Explode, ExplodeAnd financial), meta(FBAnd Finance) and Twitter. Only Meta is the least, but you could say there is a good reason for that.
Overall, I think the Pinterest platform is unique in its style, and I personally consider it in its own niche of the “visual search engine”, which gives this platform great potential to expand advertisers’ e-commerce offerings. This can lead to a significant increase in revenue per user and even a potential acquisition from the struggling tech giant. This company is definitely one to watch.
