Pinterestthis is (NYSE: PINS) Shares recently fell after the company released mixed numbers in the first quarter. Revenues increased 35% annually to reach $ 272 million and exceeded estimates by $ 1 million, but her adjusted net loss increased from $ 40 million to $ 60 million, or $ 0.10 per action, which missed expectations of a penny.
Pinterest offered no indication due to the COVID-19 pandemic, but warned that its gross margins would contract as the cost of assisting new users would overwhelm its growth in advertising revenue and operating expenses. would increase. In other words, investors should expect slower income growth with larger losses.
Investors were clearly not happy with this bleak prospect, but is Pinterest still a good long-term investment? Let’s take a look at Pinterest’s past growth, plans for the future and the stock situation in five years.
How fast is Pinterest growing?
Pinterest went public last April at $ 19 a share, but the title fell below its introductory price following its latest report. Pinterest’s annual revenue increased 51% in 2019, as its global monthly active users (MAU) increased 26% to 335 million.
Pinterest’s UAMs further increased 26% year over year to 367 million in the first quarter. Its international AMUs increased 34% to 277 million, and its American AMUs increased 6% to 90 million, but still generate significantly less average revenue per user (ARPU) abroad.
Wall Street expects Pinterest revenue to grow only 14% this year due to the pandemic and other macroeconomic pressures, but will accelerate to 34% growth next year as that these headwinds will subside. Pinterest is not expected to be profitable this year, but could generate a slim non-GAAP profit by 2021.
Investors should not trust these long-term estimates too much, as the impact of COVID-19 remains difficult to quantify. Nevertheless, Pinterest is likely to experience sluggish growth this year, as advertisers curb spending and rising spending transforming user growth into a double-edged sword.
What are Pinterest’s long-term goals?
Pinterest has carved out a place in the crowded social media market with virtual billboards that showcase a user’s hobbies and interests.
Facebook (NASDAQ: FB) chased Pinterest with Instagram collections and the new Hobbi app, and Alphabetthis is (NASDAQ: GOOG) (NASDAQ: GOOGL) Google has challenged Pinterest with a “Collections” feature to save images and search results – but none of these efforts have yet dampened the growth of Pinterest.
To differentiate its platform, Pinterest launched “buyable” pins and allowed retailers to download their entire catalogs. Last year, Cowen & Co. claimed that 48% of Pinterest users used the platform to find and buy products, compared to only 14% of Facebook users and 10% of Instagram users.
Pinterest is well suited for clothing, home and travel items, as users can passively convince their subscribers to buy the same products or experiences. This cycle is undoubtedly more organic than creating targeted ads on Facebook, Instagram and Google, and makes it a potential leader in the “social shopping” space. Its long-standing partnership with Shopify, which allows small merchants to sell their products on Pinterest, could complement this growth.
Another top priority for Pinterest is improving the monetization of its international users, who now represent more than three quarters of its UAMs. Its international ARPU jumped 76% a year to $ 0.13 in the last quarter, but that was overshadowed by its domestic ARPU, which rose 18% to $ 2.66. Closing this gap could require overwhelming investments.
Pinterest also wants to diversify its ads away from the clothing, home and travel industries, while encouraging users to pin more videos. These efforts could strengthen its defenses against fierce rivals like Instagram, which also offers publications on its largest platform.
A promising company with a lot to prove
Pinterest is still growing, but its losses are widening and its stock is not cheap at around eight times expected sales this year. Facebook, which is firmly profitable, is trading at less than 8 times sales this year.
Pinterest’s MAUs could continue to increase over the next five years, but the costs of maintaining this growing user base could offset its advertising revenue and make it difficult to create profits. Meanwhile, the expanding social shopping market could wipe out the advantage of Pinterest’s primary engine as other platforms promote their posts. Its growth abroad may slow as its regional competitors launch similar applications.
In short, Pinterest is a promising company that still has a lot to prove. I think it could progress higher over the next five years, but constant pressure from competitors and concerns about its losses could prevent it from outperforming its larger industry peers.