Pinterest Inc. (NYSE:PINS): A Fundamentally Attractive Investment – Wire Real Estate

Pinterest Inc. (NYSE:PINS): A Fundamentally Attractive Investment




Sep 1, 2020

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Pinterest Inc. (NYSE: PINS) stellar performance in the market shows no signs of slowing down as investors react to a blow-out quarter that once again affirmed the company's growth metrics and long-term prospects. Likewise, the company has confirmed the termination of a future lease contract as it continues to restructure its operational structure in response to the effects of COVID-19.

Why Pinterest is Rallying

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Going by the recent quarterly earnings report, there is no doubt that Pinterest is firing on all cylinders. The social media company has seen monthly active users increase substantially, especially in the aftermath of the COVID-19 pandemic. The fact that most of the new users are coming from international markets underscores the growing demand for the company's visual discovery engine abroad.

Similarly, the stock has been on a roll attributed to strengthened investor confidence about its long-term prospects. The stock is already up by more than 20% for the year and trading in a steep uptrend. Given the strength of the upward momentum, a spike to new all-time highs looks likely.

Pinterest has made a name for itself as a reputable social sharing site for pinning recipes, home inspirations, among others. Its app shows people's visual recommendations based on their personal taste and interest.

$89.5 Million Lease Charge

In the aftermath of the COVID-19 pandemic, the company has had to change the way it does things as working from home becomes the new norm. In a bid to cut back on unnecessary expenditures, the company has confirmed the termination of a large San Francisco office lease.

The company is poised to incur an $89.5 million charge on terminating the lease contract. The termination is a significant move that signals how tech companies are increasingly scaling back on unnecessary real estate plans amid the COVID-19 pandemic.

User-Base Growth

The scaling back is not expected to affect Pinterest growth metrics that have improved significantly on COVID-19 pandemic, presenting a perfect business opportunity. Over the past four months, the social sharing site has attracted 116 million new users, taking its Monthly Active Users up 16% to 416 million.

The fact that 90% of the new users have come from the international market indicates the app is resonating well with people abroad, poised to present unique growth opportunities. While the U.S market accounts for a huge chunk of the company's total revenue base, thanks to its higher average revenue per user, the company's rate is growing in international markets should be a key driver of bottom-line growth in the years to come.

User growth presents a perfect opportunity for Pinterest to strengthen its advertising business and once again strengthen its revenue streams. Likewise, sizeable monetization potential affirms a company with tremendous long term prospects.

Pinterest e-commerce Push

In addition, the social sharing site is increasingly expanding its footprint in pursuit of new growth opportunities. E-commerce is an area the company has set sights on as it moves to monetize its platform that allows people to share interests.

A partnership with Shopify Inc. paves the way for the company to connect users with small businesses that specialize in the sale of various products and services and, in return, find some way to generate some income on the side.

Revenue Growth

Pinterest has already unveiled a number of features on its site designed to entice users to do shopping as it continues to make its foray into e-commerce. The new features should continue to affirm the run rate that saw the company post impressive second-quarter financial results.

In the quarter, revenues were up 4% year-over-year to $272 million in what was arguably one of the most challenging quarters due to the COVID-19 pandemic. Revenues topped consensus estimates of $251 million. The company reported an adjusted loss of $0.07 a share, beating analysts' estimates of $0.13 a share loss. Revenue ripped higher at the start of July, jumping 50% with management expecting third-quarter revenue to be up 30% year-over-year.

Multiple analysts have already upgraded the Pinterest stock and boosted their share price target. The upgrade comes on strong belief that the company is in a phase of robust growth owing to the unveiling of new features in the site and the amount of traction the company is gaining on international markets.

Bottom Line

Pinterest is in a phase of robust growth, which explains why it is the subject of renewed investor interest in the market. Robust user growth all but affirms the company's long term prospects given the potential impact a bigger user base is poised to have on the revenue base.

The introduction of new products such as clickable action as part of e-commerce ambitions also affirms the company's growth metric as it continues to expand into new areas of growth. Pinterest is also strengthening its prospects on advertising having introduced new tools that help advertisers leading to an increase in ad spend in the socials sharing site.

Surging user base, e-commerce prospects compounded by advertising prospects underscore Pinterest growth metrics and long term prospects.

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