The growing tech company investors are keeping an eye on.
Pinterest, the social media and image sharing platform, serves two main purposes. While it helps folks find lifestyle inspiration, it also exposes them to products and services that they can buy.
This has been extremely popular as the service boasts hundreds of millions of users. In the U.S., the platform reaches over 80% of females between 25 and 54, and interestingly enough, 40% of fathers. Around 1 out of every 2 millennials visit the site or app each month.
Between positive second-quarter results this year to new partnerships, it’s important to think about where this company is heading next.
Read on to dive in!
What Happened So Far
The stock itself has seen an intense fall followed by an intense rise. It was just in April 2019 that Pinterest launched its IPO, at 19% per share, and then rising to almost $37 per share. Things were looking great for the stock, but when CV-19 made a major hit in March 2020, the markets plummeted across the board, many investors decided to sell their shares.
Each Pinterest share was worth just $10. Now, the stock is trading at nearly $35 per share, back closer to its high from before the pandemic began.
That drop to $10 in March was not a Pinterest-specific issue given the circumstances of the market. Many investors were selling in fear for many companies, and the tech sector as a whole was certainly involved. Think about it this way. At the close of trading on March 19, Apple, Alphabet, Amazon, Facebook, and Microsoft lost a combined $1.3 trillion in value. In fact, if you look at the S&P 500 as a whole, it was seeing a fall of around 30% around that same time.
Suddenly, right as August was about to begin, Pinterest surged 36%. The reason being is that the company surpassed second-quarter estimates both in terms of earnings and in revenue. The increase in revenue is less attributed to the U.S., and actually caused by international users, since international revenue rose 72%.
Pinterest stock performance as of August 2020 from EEON
The success in earnings and revenue is impressive given the state of U.S. GDP. During the second quarter, GDP decreased by almost 33%. This also implies that fewer people were spending money on ads, which is Pinterest relies on as a source of revenue.
However, this success is also not surprising by any means, as the pandemic likely helped the company. While at home, folks use on the platform for ideas for family activities, home cooking, and much more. Projections indicated that monthly active users (MAUs) would increase from 367 million to 379 million, but it actually went to 416. Therefore, the number of additional users was about four times what was expected. Even as in-place restrictions eased, the amount of engagement did not decrease.
Users have, in the past, expressed wishes for Pinterest to be more “shoppable”. After folks see an image of something enticing, the company wants to make it even easier for them to buy it. A lot of the current user interface is focused on products that are uploaded by sellers, relevant to searches, and relevant to the season. Pinterest plans to keep improving this engine so that the increases in MAUs translates more to increases in earnings and revenue.
While this is in part an internal effort, Pinterest has been executing on external efforts as well. One big example of this is their relatively new partnership with Shopify, the fast-growing e-commerce platform. A Pinterest app is now available in the Shopify app store, allowing Shopify shop owners to easily post their products or services into Pinterest as images. One estimate said that for every 10% of Shopify merchants that become Pinterest advertisers, $117 million could be added to Pinterest add revenue. Early beta testing was promising, with catalog feed uploads increasing almost 150% in the year’s first quarter.
As quoted from the Pinterest Newsroom, “Shopify is the perfect partner for bringing access to catalogs, Product Pins and shopping ads to merchants so they can get in front of the millions of Pinners looking for unique products that match their taste.”
Now that the stock is back around its all-time high price, we should expect growth to continue. As Pinterest keeps figuring out more ways to extract revenue from its growing user base, both internally and externally, investors will continue to be excited about this stock. It has a long way to go, and investing early could pay off in the longer run.
[Note: This article is not financial advice.]