Pinterest (PINS) catapulted to a record high after it reported fourth-quarter earnings that beat expectations. Now, thanks to a rebound in advertising, is PINS stock a buy?
They created an internet application where users can browse millions of images and videos posted by Pinterest users.
Pinterest is not a social media experience like Facebook, Snap (SNAP) and Twitter (TWTR). It’s considered more of a personal experience. When users come to Pinterest, often they are trying to find or accomplish something. The site can help with generating ideas or inspiration on a wide range of activities.
Pinterest has developed methods for image searches that leverage machine learning, computer vision and a recommendation engine to help users search, browse and organize images and videos.
How Popular Is Pinterest?
At the end of the fourth quarter, Pinterest had 459 million monthly active users. That’s up 37% from the year-ago period. Moreover, the company added more than 100 million monthly active users globally in 2020. More than 76% of users are outside the U.S., although the majority of its revenue is domestic.
User activity might include searching for recipes, travel tips or for ideas about home improvement. For example, a user interested in remodeling their kitchen could begin a visual search for ideas and inspiration. Or, they may be looking for popular hairstyles, apparel and decoration ideas.
Pinterest users can follow other users or specific topics. They can also buy goods on the site and create their own pages for others to follow.
Pinterest also provides a platform for businesses to build their brands and drive sales. It’s also investing in automation to make it easier for advertisers to use Pinterest and scale spending.
Altogether, Pinterest is an attractive venue for advertisers, the source of all its revenue. Pinterest does not take a cut of the sales made through its site.
The company held its initial public offering in April 2019 that priced PINS stock at 19, raising $1.4 billion with a valuation above $12 billion. Its valuation today is $42 billion.
Like most companies, Pinterest has had to maneuver through the difficult business environment caused by the coronavirus. The pandemic has had a big impact on internet companies highly dependent on advertising, like Pinterest.
PINS Stock: Fundamental Analysis
Pinterest reported fourth-quarter earnings on Feb. 4 that topped expectations.
Revenue jumped 76% from the year-ago period to $706 million. That was well above Wall Street expectations of $645.6 million. It reported adjusted earnings of 34 cents, topping views of 32 cents. PINS stock jumped in reaction.
Global average revenue per user in the U.S. during the fourth quarter climbed 49% to $5.94. Globally, it rose 29% to $1.57.
“Our strategy is working and our team is executing,” said Todd Morgenfeld, chief financial officer, in the conference call with analysts after the earnings report. “The investments we’ve made in technology and then sales coverage are continuing to pay off.”
Pinterest did not provide specific guidance for its first quarter due to continued uncertainty around the pandemic. But the company did say it expects fourth-quarter revenue will grow around 70% year over year.
Analyst Views On Pinterest Stock
Following the earnings report, KeyBanc Capital Markets analyst Justin Patterson, raised his price target on PINS stock to 92, from 86.
“Fourth-quarter results continue to show the bull thesis playing out,” he wrote in a note to clients.
“Specifically, users remain engaged, advertiser strength is broad, shopping initiatives continue to make progress, and international monetization is making new inroads,” he said.
In addition, wrote Moness Crespi Hardt analyst Brian White in a note, “Pinterest has made significant investments to improve its platform for advertisers, enhance the user experience, expand further into overseas markets, and become more shoppable.”
In the stock market, timing is critical. So when you’re looking for stocks to buy or sell, it’s important to do the fundamental and technical analysis that identifies lower-risk entry points that also offer solid potential rewards.
Pinterest Stock Technical Analysis
The IBD Stock Checkup tool shows that Pinterest currently has an IBD Composite Rating of 99 out of a best-possible 99. The rating means Pinterest stock currently outperforms 99% of all stocks in terms of the most important fundamental and technical stock-picking criteria. The best stocks will often rate 98 or 99 at the time they launch a big price run.
PINS stock has a Relative Strength Rating of 94. The rating shows how a stock’s price performance over the prior 52 weeks holds up against all the other stocks in IBD’s database. Look for stocks with a rating of 80 or higher.
The stock’s relative strength line is at a record high, which is a good thing. The relative strength line measures a stock’s price performance vs. the S&P 500. Typically, the RS line of the strongest stocks is either confirming or leading a stock’s price into new high ground.
PINS stock has an Accumulation/Distribution Rating of c+. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A grade of A signals heavy institutional buying. The lowest rating of E means heavy selling. Think of the C grade as neutral.
Is PINS Stock A Buy?
PINS stock has been on a long run and many of the basic stock-picking criteria are in the right places. However, the stock is currently extended and out of buy range. But without a clear chart pattern, a proper buy point is not recognizable at this time.
Pinterest is well-positioned to drive long-term growth with improving profitability. A large market opportunity, a loyal community of sellers and buyers, and new marketing and product initiatives should help Pinterest attract and retain customers.
Pinterest is the No. 2-rated stock in IBD’s Internet-Content industry group.
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Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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