The company’s recent sales present a great opportunity to buy its stock on the downturn.
Tech stocks have been soaring this year as the artificial intelligence (AI) boom has given some of the sector’s leading companies a big tailwind. Some AI-focused companies still have plenty of room to run, so it may not be too late to invest in them. However, investors may also want to consider going against the market and buying shares in companies that have underperformed this year if these companies have significant upside potential. One example that fits this requirement is Pinterest (PINS 1.63%). Here’s why a social media specialist is worth the investment.
Pinterest has made progress
Despite this year’s lackluster stock market performance, Pinterest is trending in the right direction on many fronts. The company had to deal with a slowing advertising market and declining monthly active users (MAUs) a few years ago, but the social media giant has largely negated those headwinds. In Q2, Pinterest’s MAUs increased 12% year over year to 522 million, a new record for the company.
For Pinterest, growing our ecosystem is key. The more users a platform has, the more attractive it becomes to businesses looking to target advertising to specific customers. Pinterest’s revenue soared to $854 million in the second quarter, up 21% year-over-year. Even better, Pinterest is profitable. The company’s net income of $8.9 million was significantly higher than the $34.9 million net loss reported in the year-ago period.
Despite these financial results, why hasn’t Pinterest’s market performance improved? The company’s stock price fell following its second-quarter earnings release, but this is because investors are This was partly because they did not like management’s guidance for the third quarter, which predicted a slowdown in growth. They say the market is forward-looking, but perhaps in this case it’s not looking far enough into the future.
In my view, no matter what short-term challenges it faces this year, Pinterest remains a good long-term bet. Here’s why:
long term perspective
Pinterest’s 522 million MAUs may not have peaked yet. Sure, the company has a lot of competition in the social media industry, but there’s room for multiple winners to coexist here, as in the past. Pinterest is different from most major social media platforms. Its visual flavor and desire to avoid divisive social or political issues make it unique among its peers. Therefore, there remains great potential for continued growth, especially in terms of advancements in international markets.
When will Pinterest peak? Keep in mind that Facebook, the world’s largest social media website, has just over 3 billion MAUs. Pinterest may not get there, but I think it will eventually reach 1 billion users. In Q2, 288 of Pinterest’s MAUs were in the Rest of the World (ROW) category (outside of Europe and North America). However, ROW grew faster than all other regions. It also has the lowest average revenue per user (ARPU) ever.
In other words, Pinterest has a huge opportunity to continue growing its user base and improve its monetization efforts in these markets. Additionally, one of Pinterest’s long-term goals is for the platform to become an e-commerce hub. Progress has already been made in this area. Pinterest recommends relevant and shoppable ads and content to you based on your preferences. The company is leveraging AI here. Pinterest uses AI-powered algorithms to show each user relevant content in hopes of motivating them to take action.
The company has become increasingly adept at giving users exactly what they want right in front of them, with outbound clicks on Pinterest increasing more than 100% for three consecutive quarters. Between monetization in international markets, enhanced shopping functionality, and remaining user growth potential, Pinterest could deliver huge returns to investors, given its historical short-term volatility. .
