Pinterest (PINS) could be the best value in social media stocks. Pinterest (NYSE: PINS) shares were trading at $35.51 on 9 September 2020.
Yet Pinterest’s share price has grown dramatically in 2020. For instance, Mr. Market paid $18.80 for PINS on 2 January 2020 and $35.51 on 9 September 2020. In addition, Pinterest hit a high of $38.81 on 2 September 2020.
Pinterest (PINS) is cheap for a social media stock. However, Pinterest is small for a social media platform.
What Value Does Pinterest Have?
For instance, Business of Apps estimates Pinterest had 367 million monthly active users (MAU) in First Quarter 2020. Statista estimates Facebook (NASDAQ: FB) had over 2.7 billion MAU in 2nd Quarter 2020.
Conversely, Statista estimates the most popular picture app, Instagram, had over billion monthly active users worldwide in May 2020. In contrast, TikTok had over 800 million users worldwide in July 2020.
Yet Pinterest is experiencing impressive growth. For instance, Pinterest’s number of monthly active users (MAU) grew from 128 million in 1st Quarter 2018 to 367 million first quarter 2020, Business of Apps estimates. In addition, Pinterest’s international MAU count grew from 63 million in First Quarter 2016 to 277 million in 1st Quarter 2020.
Consequently, the percentage of Pinterest’s international MAU grew from 49.2% in 1st Quarter to 2016 to 75.5% in first quarter 2020. Hence, Pinterest has a fast growing social media platform, and it is cheap.
Pinterest Loses Money
Pinterest (NYSE: PINS) loses money despite its growth. For example, Pinterest reported a quarterly operating loss of -$104.53 million on 30 June 2020.
However, Pinterest’s quarterly operating loss fell from -$1.167 billion on 30 June 2019. Yet, Pinterest’s quarterly operating loss grew from -$43.19 million on 31 December 2019. Similarly, Pinterest’s quarterly common net loss fell from -$1.159 billion on 30 June 2019 to -$100.75 million on 30 June 2020.
Interestingly, Pinterest’s quarterly gross profit rose from $155.83 million on 30 June 2019 to $303.62 million on 31 December 2019. However, the quarterly gross profit fell to $164.23 million on 30 June 2020.
Moreover, Pinterest quarterly revenues rose from $261.25 million on 30 June 2019 to $399.9 million on 31 December 2019. Conversely, Pinterest’s quarterly revenues fell to $272.49 million on 30 June 2020.
In addition, Pinterest’s revenue growth has collapsed. Stockrow estimates Pinterest’s revenue grew in the quarter ending on 30 June 2019. That revenue growth rate fell to 46.38% on 31 December 2019 and 4.3% on 30 June 2020. Thus Pinterest could no longer be a growth stock.
How Much cash is Pinterest Generating?
Pinterest (PINS) is burning cash. For instance, Pinterest reported a negative quarterly operating cash flow of -$36.52 million on 30 June 2020.
The quarterly operating cash flow fell from $57.29 million on 31 March 2020. Yet the quarterly operating cash flow rose from -$49.50 million on 30 June 2019.
Consequently, Pinterest reported a quarterly ending cash flow of $121 million on 30 June 2020. That quarterly ending cash flow fell from $768.91 million on 31 March 2020 and $1.274 billion on 30 June 2019.
On the positive side, I do not think Pinterest is borrowing money. To explain, Pinterest’s quarterly financing cash flow fell from $1.264 billion on 30 June 2019. Pinterest reported a -$40 million financing cash flow for the quarter ending on 30 June 2020. Thus, I think Pinterest paid debt instead of borrowing money.
Pinterest had $1.703 billion in cash and short-term investments on 30 June 2020. That cash was down from $1.737 billion on 31 March 2020 and $1.851 billion on 30 June 2019. Yet, Pinterest reported total assets of $2.250 billion on 30 June 2020. Pinterest reported $343 million in total liabilities on the same day.
Is Pinterest a Good Stock?
I consider Pinterest (PINS) an interesting stock because it is cheap and owns a growing social media platform.
However, I think Pinterest has a small margin of safety because it has small amounts of cash. There is an interesting upside to Pinterest, however.
Unlike Facebook (FB), Twitter (NYSE: TWTR), and TikTok, Pinterest generates no noticeable controversy. Nobody is accusing Pinterest of being a monopoly, a promoter of hate and terror, or a front for Chinese intelligence.
Instead, all Pinterest seems to offer are many interesting images. Hence, Pinterest could be safe because it is boring. However, I cannot see how Pinterest could attract large audiences or a profitable level of advertising. To explain, the world of social media controversy equals cash. Without controversy, social media may not attract advertisers or business users and make money.
Investors need to be careful with Pinterest because its social media platform could never generate enormous growth or make significant amounts of money. Yet, I consider Pinterest worth investigating because it could be the safe and cheap stock in social media.
Originally published at https://marketmadhouse.com on September 9, 2020.