There is no shortage of technology stocks that have benefited immensely during the coronavirus pandemic as the use of online channels to buy, entertain and communicate has exploded. As advanced economies prepare to reopen after a tumultuous year, the big challenge for growth investors is to find stocks that could continue to thrive in the post-pandemic world.
In this context, Pinterest (NYSE :), based in San Francisco, offers an attractive buying opportunity after its recent weakness.
Shares of the digital scrapbooking and search company were down about 20% on Wednesday from their record high in February. This sluggish phase is as investors shun high-growth stocks over concerns that their values ??have become too expensive and that their growth will slow after the economic reopening. Pinterest stock more than tripled by 2020.
Pinterest Weekly Chart.
Despite this uncertain growth stock environment, there are some solid reasons that make Pinterest a unique social media player. The platform serves as a digital pinboard for photos and ideas for segments such as fashion, weddings, recipes and more, allowing users to scroll through a feed of "pins" that contain images or videos.
Users can then store the pins on customizable boards to gather ideas for everything from vacation plans to dinner recipes or holiday shopping lists. This structure makes Pinterest very different from other social media companies as users come to the site with the intention of making a purchase.
User Base Expansion
In recent years, Pinterest has invested in making its platform more ecommerce friendly. Pins are now & # 39; shoppable & # 39; meaning users can click on an item (or a similar recommendation) and purchase it from a brand's website.
Last May, Pinterest and Shopify (NYSE 🙂 launched a new channel that allows merchants to use & # 39; product pins & # 39; change as part of the company's commitment to monetize its large user base of small and medium-sized businesses.
Thanks to these initiatives, Pinterest has seen user traffic and engagement grow to record highs during the pandemic. The global number of monthly active users rose to 459 million at the end of the fourth quarter, up 37% from a year earlier. That increase in traffic was responsible for a 76% increase in sales to $ 706 million. The company's estimated revenue will increase in the "low range of 70%" in the period ending March.
In the future, advertisers may see lasting value in Pinterest due to its very diverse user base. For example, women make up more than 60% of the platform worldwide, making it quite attractive to digital advertisers targeting a female audience. The number of pinners under the age of 25 grew twice as fast as those aged 25 and older. This segment uses Pinterest to search for fashion inspiration, interior ideas, and study tips.
The improved financial and user statistics of PINS undoubtedly played a big part in the surge in its stock during the pandemic, but the regulatory threat facing the major social media companies is another big positive for small players such as Pinterest.
An app with a clear and defined audience with little room for abuse is much more resilient to potential regulatory changes worldwide than the behemoth like Facebook (NASDAQ 🙂 and Google (NASDAQ :), the social media companies that some politicians want out of go together.
The majority of the 31 Wall Street analysts are optimistic about the company's growth potential, and 21 recommend buying PINS. The mean price target of $ 90.02 for analysts implies that PINS has about 22% upside potential over the next 12 months
Bottom Line
Pinterest is in its early growth phase with plenty of room to expand Average Revenue Per User (ARPU), thanks in part to its unique appeal and attractive demographics. This combination makes its stock a good long-term buy for investors looking to take advantage of the current weakness.
