Since the onset of the novel coronavirus, a number of companies have thrived due to profound sociological changes. Visually oriented hobby and interest sharing social media platform Pinterest (NYSE:PINS) probably isn’t the first name that comes to mind. Yet, an argument could be made that PINS stock belongs in the winner’s circle amid the “new normal.”
Many market traders don’t even realize just how big Pinterest is as a business. This is a company with $1.22 billion in trailing 12-month revenue. It also has a virtual army of more than 416 million monthly active users.
On the other hand, PINS stock isn’t as cheap as it used to be. Contrarian investors might balk at the idea of owning a stock nearing its 52-week high. I understand this concern, but it shouldn’t be a deal breaker.
Could PINS actually be the ultimate coronavirus stock? It’s an unusual notion, but not without merit. And given the platform’s incredible growth, the rapid rise in the PINS share price might actually be justified.
A Closer Look at PINS Stock
Here’s where the rubber meets the road for momentum-focused traders. With a 52-week range of $10.10 to $45.20, there’s no denying that the bull run in PINS stock has been phenomenal.
Besides, PINS stock is trading much closer to the top of the range than the bottom. So, the bulls are completely in control of the price action at this point.
Skeptics might see a crack in the foundation, however. That’s because the trailing 12-month earnings per share for PINS stock is -71 cents. Negative numbers aren’t particularly encouraging, so that’s a possible red flag.
Given that warning sign, is there enough potential in PINS stock to appease value investors’ concerns? A deep dive into the heart of this fascinating social media platform ought to shed some light and quell some fears.
Without a doubt, you’ve noticed the explosive growth of social media during a time when people are stuck at home because of the pandemic. Like it or not, socializing has increasingly become an online activity.
This trend is reflected in Pinterest’s mind-blowing growth. If you can believe it, for more than a year Pinterest has been expanding its user base by more than 25% each and every quarter.
I don’t necessarily expect that expansion rate to continue unabated. Still, it feels like few market traders have really picked up on Pinterest’s growth story. Perhaps they’re busy trading Twitter (NYSE:TWTR) stock, which is always a topic of conversation on financial message boards.
What the social media pundits probably don’t realize is that Pinterest actually has more monthly users than Twitter. Besides, it could be argued that Pinterest gives its users more of a social connection and a warm-and-fuzzy feeling than Twitter. And that’s a recipe for enhanced platform loyalty.
Getting Niche for Max Reach
Pinterest captures a niche component of what might be called the social commerce market. Users aren’t necessarily just staring at cute and fun pictures on Pinterest. They’re sometimes being converted into customers as well.
With this in mind, Pinterest CFO Todd Morgenfield compared the platform to a digital version of browsing in physical stores. I’m totally on board with that analogy as I do get that browse-y feeling when I’m on Pinterest.
This comparison presents, I believe, a distinct advantage over Twitter. And it’s more than just a feeling as the data supports Pinterest’s analogy to socially enhanced physical store browsing.
Specifically, the first half of this year saw a 50% increase in the number of Pinterest users coming to the platform with commercial intent. Moreover, product-only searches through Pinterest increased eight times during this time frame.
The Bottom Line
It might have surprised you to learn about the growth rate of Pinterest’s user base. In this light, unless you’re a staunch contrarian, the high price tag of PINS stock should seem entirely justifiable.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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