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Pinterest stock lost about 11% on Tuesday - March 27, 2021 - after the release of its earnings report for the first quarter of 2021. While the financial numbers were actually very strong, management provided fairly low guidance numbers for user growth.
The narrative was that market expect big user numbers going forward, but a different story was for once offered. In practical terms, the different numbers lead to a lower immediate valuation, but in theoretical terms, the business model of PINS accurately describes the future.
Pinterest looks well-positioned to delivering vigorous revenue growth and expanding margins in the years ahead. If the business does well, the stock price should follow.
Some of the deceleration in user growth will be temporary due to the impact of the pandemic, although it obviously makes sense to expect user growth to slow down as the platform gains size over time. Nevertheless, Pinterest is still producing outstanding revenue growth, and the opportunities for sustained improvements in engagement and monetization are very exciting, both in advertising and in ecommerce.
A growing top line, combined with an expansion in profit margins could be a powerful upside fuel for Pinterest stock going forward. Any weakness in the stock price could create a buying opportunity for long-term investors with an opportunistic approach and enough tolerance to volatility.
Knowledge is power.