Pinterest (NYSE:PINS) stock is badly in need of a reset.
Like other social media companies, PINS is having a rough go these days. The stock is down by 26% since Jan. 1, and by 40% over the last three months.
But unlike other social media stocks, Pinterest also got an outsized boost from the unique circumstances of the Covid-19 pandemic. When people were locked down and brick-and-mortar store closed, PINS saw a huge shift in usage.
Now those users are moving away, and the shift is reflected in the stock’s oversized drop. Early last year, Pinterest stock rose from less than $20 to all-time highs of $89.90.
Now you can get it for less than $27.
Pinterest at a Glance
I don’t use Pinterest, but I can see the appeal. Pinterest lets users create online pinboards about fashion, photos, videos or anything else they may like. If you see something you like in Pinterest, you put a digital “pin” on it.
Pinterest makes its money from advertising. People can buy products directly off the platform, and targeted advertising will show you products that most closely match your stated interests.
Pinterest users are a highly coveted demographic because they are already on the site looking for products that interest them. Many people come to Pinterest to get ideas on fashion or home décor. They’re obviously ready to spend money on whatever clothing or household items they may find.
Pinterest says 77% of users are women, with 38% of them being in the 50 to 64 age demographic.
Earnings Remain Positive, But Problems Remain
Third-quarter earnings beat analysts’ estimates on the top and bottom lines. Pinterest recorded revenue of $633 million against analysts’ expectations of $630.9 million. Adjusted earnings per share was 28 cents versus an expected 23 cents per share.
However, PINS showed weakness on growing its user base. Analysts expected 460 million monthly active users, but Pinterest had only 444 million. That was down 2% from July.
The biggest weakness for Pinterest is its international revenue. In the U.S., monthly average users are worth $5.08 each for Pinterest. But outside the U.S., international users are spending just 36 cents each on the site.
That’s a huge opportunity for Pinterest, if the company can figure out a way to capture the international market. The company is already working on extending in-app shopping features in Europe and Latin America.
Pinterest is also spreading its wings to other revenue streams. Late last year, it announced it would be launching Pinterest TV, which it described as an offering of “live, original and shoppable creator shows.”
“Pinterest is a destination for people to watch, shop and try inspiring ideas in categories like food, beauty, home, and DIY,” the company said in an October blog post. “Through recent advancements with shopping and creator features, Pinners are engaging in more immersive formats and actionable entertainment than ever before.”
The Bottom Line on PINS Stock
A few months ago when PINS was closer to $45 per share, I wrote that Pinterest was more likely to return to its IPO price of $19 than its all-time high of nearly $90.
Sadly, today that prediction is closer than ever to reality.
But its important to remember that Pinterest is still a growing company. Even despite the lower MAUs in recent months, Pinterest is expecting to earn 30 cents per share in the fourth quarter of this year, and increase revenue by 17% compared to a year ago.
Analysts believe that PINS will increase revenue by another 25% this year.
So, PINS is making money. It’s just not growing as quickly as it did during the height of the pandemic.
Pinterest will never be a company that gives you crazy outsized growth for an extended period. v now that it’s returning back to its pre-pandemic levels, PINS has an opportunity to begin again.
With a little luck, Pinterest stock could at some point become a reliable earner that you can finally keep your pin in.
On the date of publication, Patrick Sanders did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.