Pinterest Stock (PINS) Sees A Stunning 42% Jump This Week: Should I Buy It Now?

By Amit Chowdhry ● August 2, 2020
  • Shares of Pinterest Inc (NYSE: PINS) jumped over 42% this week, mainly due to the positive results from the results of the company’s second-quarter of 2020 reported on Friday

Shares of Pinterest Inc (NYSE: PINS) jumped over 42% this week, mainly due to the positive results from the results of the company’s second-quarter of 2020 reported on Friday. Specifically, Pinterest reported a massive increase in monthly active users (MAUs) — which drove the stock price up 31% on Friday alone.

“This quarter we reached a milestone—more than 400 million people now come to Pinterest every month to get and stay inspired,” said Pinterest CEO and co-founder Ben Silbermann.

The global MAUs for Pinterest increased 39% from last year and it is now at a total of 416 million. As a comparison, Pinterest saw 30% global MAU growth in Q2 2019 and 26% in the previous quarter. This surge in growth is likely attributed to the shelter-in-place orders associated with the pandemic. A lot more people are spending time on the visual discovery engine to find recipes and home decor ideas.

In a company blog post, Pinterest chief marketing officer Andréa Mallard noted that women account for more than 60% of the company’s user base. But there has been year-over-year increases for Gen Z (50%), men (48%), and millennials (36%).

In terms of revenue, Pinterest saw a 4% increase. The company hit $272 million in revenue for the quarter. Analysts were expecting over $20 million less.

The ingestion of catalogs on Pinterest increased 350% over the past quarter. And it grew 10 times for the first half of the year, mainly due to the integration with Shopify — which launched in May. And the percentage of users who visited shopping-only areas jumped over 50% in the first half of the year.

“By all accounts, this was a challenging quarter, as Covid-19 continued to spread. I’m pleased with the way we responded and remained engaged with our advertising partners,” explained Pinterest chief financial officer and head of business operations Todd Morgenfeld. “It has been encouraging to see the recovery in our business over the past few months, but there is still a tremendous amount of uncertainty and work to be done.”

However, Pinterest saw its average revenue per user (ARPU) declined 21% to $0.70. And the company posted a net loss of $101 million. Plus the adjusted net loss worsened to $38 million compared to $25 million last year.

The ARPU for U.S. users dropped 11% year-over-year to $2.50. This is mainly due to advertisers slashing their budgets temporarily.

Pinterest’s revenue has been improving every month since April and the company saw a 50% increase in July alone. Pinterest likely benefitted from some advertisers boycotting other social media platforms and spending has increased again.

For the third quarter, Pinterest is expecting revenue to increase by 30% year-over-year.

Pinterest Stock: Should I Buy It Now?

Pinterest is an extremely volatile stock as it is up less than 5% since going public in April 2019, even with the stock price jump on Friday. Personally, I prefer to invest in stocks that have seen stronger growth. However, I strongly believe that Pinterest could be a great long-term play. If the company reports a profit sometime in the next few years, then I would not be surprised if the stock price hits much higher numbers.

The company could also be a prime target to be acquired. A number of big tech companies like Microsoft, Google, Amazon, or Shopify could find ways to potentially integrate Pinterest into their own ecosystems.

Personally, I am near-term bearish on Pinterest, but long-term bullish. According to an analyst consensus report I read, I am seeing 3 analysts saying strong buy; 6 saying buy; 15 being neutral; 1 saying sell; and 0 saying strong sell.

Disclosure: I own a small number of Pinterest shares in my portfolio