Major U.S. stock indexes slid last week, although $S&P 500(.SPX)$ held up best, falling just 0.24%. Investors digested closely watched monthly employment numbers and a sharp drop in consumer sentiment.
The best-performing concepts is Social Media.
Considering the different perceptions of the stock, this time TigerPicks chose $Pinterest, Inc.(PINS)$ to have a fundamental highlight to help users understand it better.
$Pinterest, Inc.(PINS)$
Pinterest, Inc. is a visual search and discovery company. The Company’s primary service, Pinterest, can be accessed through its mobile application or the Web. People use Pinterest to find ideas. As they browse Pinterest content, Pins, they fine-tune their tastes and find the idea.
It has approximately 498 million monthly active users across the world. Content on Pinterest comes from a variety of sources, including retailers, brands, creators, publishers and users.
Pinterest, Inc. stock was soaring on Friday after releasing strong earnings results. It appears that sentiment may have been low heading into the report as investors may have lost faith in the growth story. PINS continues to show strong user growth, even as it laps tough third-party advertiser comparables. The stock still looks buyable here given the strong financial picture and reasonable valuation.
PINS Stock Key Metrics
The social media company returned to its “beat and raise” profile, generating 18% YoY revenue growth to $1.154 billion — exceeding guidance of between $1.125 billion to $1.145 billion.
I was surprised to see monthly active users (“MAUs”) show 11% YoY growth, including 2% sequential growth in North America.
Average revenue per user (“ARPU”) grew 6% YoY. For those who have not looked at PINS in a while, it might be confusing why the global ARPU grew at only 6% while all the individual regions grew at a far faster rate. That’s just how the math works, given the vastly different geographical ARPUs.
PINS saw adjusted EBITDA grow at a faster 28% clip as margins grew 300 bps YoY.
Is PINS Stock A Buy, Sell, or Hold?
After the stock rally, PINS traded at around 6.5x sales. Consensus estimates call for some deceleration in top-line growth over the coming years.
As a bullish investor, I note that the company has been working against tough comparables and I do not see clear reasons to believe in a material beat to consensus estimates.
I continue to target 35% GAAP net margins over the long term, even as I note that $Meta Platforms, Inc.(META)$ recently saw its advertising business generate a near-60% operating margin in the latest quarter. That places the current valuation at around 18x earnings, which looks very reasonable to me. I expect the company to sustain around 10% top-line growth over the coming years, justifying a fair value range of around 16x to 25x earnings. With the stock trading at the low end of that range, I still see market-beating returns ahead.
PINS Stock Risks
PINS is exposed to economic factors and may see growth deteriorate in the event of a market downturn. Its recent growth might prove short-lived once it fully works through its third-party advertising integration. I do not personally use the product and thus must acknowledge the relevance risk, as it is not clear how the social media landscape might change in the future. PINS might be exposed to future tariff risk, given that a significant proportion of its revenues come from abroad.
PINS Stock Conclusion
Wall Street is cheering the results and rightfully so. The stock remains reasonably valued given the strong balance sheet, improving profitability profile, and resilient growth rates.
I might not be the most bullish in my outlook for the medium term, but I see the stock as offering market-beating returns even if it falls short of consensus estimates. PINS offers the kind of investment setup that I look for in the Best of Breed Growth Stocks Portfolio. I reiterate my buy rating for the stock.
Stock Price Forecast:
Here are the target price forecasts for the next 12 months from analysts.
Based on 30 Wall Street analysts offering 12 month price targets for Pinterest in the last 3 months. The average price target is $45.62 with a high forecast of $55.00 and a low forecast of $32.00. The average price target represents a 14.05% change from the last price of $40.00.
Resource:
https://seekingalpha.com/article/4756223-pinterest-believe-this-rally
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