Pinterest posted earnings on April 27, and as soon as it announced these results, the stock plunged 14.5% because of the slowdown in user growth. Since then, the number of users continued to increase, and Pinterest generated revenues and profits per share above what analysts forecasted. This is also due to the continued tech improvements that Pinterest is making in the platform, with “Pins Ideas” and live streaming capabilities. “Shopping List” was also included, and Pinterest is planning to use seamless payments on the site later this year.
Why the Pinterest sell-off is good for you
Despite the terrible revenue/earnings miss and the significant drop in the stock, the fundamentals of Pinterest remain solid. When growth slows, it is normal for companies to see their share prices drop. The truth is that the market may be punishing Pinterest because of their comments on a conservative revenue/earnings forecast, which is not totally out of line with analyst expectations. I expect Pinterest will continue to grow their revenues as they expand beyond social media to a broader entertainment platform that they are hoping to develop into a kind of an online hangout. They may also continue to operate at a loss until they achieve some critical scale and figure out how to develop enough profit from that scale.
What does the future hold for Pinterest?
How can you take advantage of the Pinterest sell-off and buy Pinterest shares?
Although Pinterest does look very attractive, don’t Put All Your Eggs In One Pinterest (And Instagram) Basket. Pinterest, the first and only “movement” in social media, has posted negative growth rates over the last several quarters. Analysts attributed this to decreased advertising spend and that there was much less advertising spend than initially forecasted. It’s important to separate Pinterest from Instagram. In addition to the 11 million advertisers who pay $4.30 for every $1 spent on advertising on Pinterest, there are 2 million advertisers who pay $1.35 for every $1 spent on Instagram. It’s important to track your ROI, in my opinion. At the same time, it is important to keep a close eye on current industry trends.
Based on my long-term view on Pinterest and my prediction of significant growth acceleration in the next 12 months, I believe Pinterest has the potential to see its share price increase to over $100 in 2019 or 2020. As of this article’s time, the price was at $75.67 with an annual dividend yield of 2.8%. If you like what you’ve just read, consider following this account to receive future updates.