Should you buy Pinterest stock?
- 5 months ago
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For Pinterest to increase its profitability (and also its valuation), the company needs to focus on monetizing the users that are outside of the US and Canada and it did manage to increase average revenues per user in the rest of the world by 50%. But they’re still low at only 43 cents per user.
The company could be an acquisition target because of its large user base. In the past, there were rumors that both Google and PayPal were interested in acquiring the company. But that was back when interest rates were low and capital was flowing freely.
Let’s assume Pinterest can get to 400 million in net income and then grow at 15% per year for the next 10 years. The company would be worth around 35 billion in ten years’ time based on 25 times multiple. And that works out to an investment return of just under 9% per annum.
But I’m not convinced that growth is possible. US numbers are flat and the platform is heavily reliant on traffic from Google which seems risky. A digital pin board just doesn’t seem like a compelling business right now, particularly at this valuation. So I give this stock a bearish rating.
But these are my personal opinions, not financial advice. And I have no position in Pinterest stock. For more detailed investing ideas, visit our website overlookedalpha.com
#stocks #investing #stockstowatch #overlookedalpha
For Pinterest to increase its profitability (and also its valuation), the company needs to focus on monetizing the users that are outside of the US and Canada and it did manage to increase average revenues per user in the rest of the world by 50%. But they’re still low at only 43 cents per user.
The company could be an acquisition target because of its large user base. In the past, there were rumors that both Google and PayPal were interested in acquiring the company. But that was back when interest rates were low and capital was flowing freely.
Let’s assume Pinterest can get to 400 million in net income and then grow at 15% per year for the next 10 years. The company would be worth around 35 billion in ten years’ time based on 25 times multiple. And that works out to an investment return of just under 9% per annum.
But I’m not convinced that growth is possible. US numbers are flat and the platform is heavily reliant on traffic from Google which seems risky. A digital pin board just doesn’t seem like a compelling business right now, particularly at this valuation. So I give this stock a bearish rating.
But these are my personal opinions, not financial advice. And I have no position in Pinterest stock. For more detailed investing ideas, visit our website overlookedalpha.com
#stocks #investing #stockstowatch #overlookedalpha