Shares of digital pinboard site Pinterest (PINS +7.36%) experienced a resurgence in the past few months. The stock hit a 52-week high of $41.60 in February.
That's a dramatic turnaround from the 52-week low of $20.60 reached last May. The company's growth in both monthly active users (MAUs) and revenue last year helped to drive the stock price reversal.
Since then, shares have retreated from its February high. But does this signal a buy opportunity?
To make a decision whether to snatch up Pinterest stock, it's important to understand if the company's performance can endure over the long run. To that end, let's examine Pinterest more closely.
NYSE: PINS
Key Data Points
Pinterest's user growth success
Pinterest ended 2023 on a high note. The company reported record high monthly active users of 498 million in the fourth quarter, an 11% jump up from 2022. This led to $3.1 billion in 2023 revenue, up from the prior year's $2.8 billion.
Last year's growth in MAUs was no fluke. Pinterest's management team established new business priorities for the company after CEO Bill Ready took over the top spot in the summer of 2022. One of these priorities was to grow users on Pinterest's platform.
The company is achieving this objective with the help of artificial intelligence (AI). Pinterest employs AI to find and recommend content tailored to the specific interests of each user to keep people engaged on the platform.
Pinterest also added new features in 2023, such as its collage functionality, which allows users to cut out images from their content collection and combine them. The majority of users adopting this collage capability are those who have never pinned content on Pinterest, indicating the feature's success in pulling in new users.
Pinterest's compelling financials
Along with user growth, the company is focused on raising its average revenue per user (ARPU). Pinterest is tackling this from multiple fronts. First, it more than doubled the number of advertising products available to marketers who want to run ads on the platform.
Second, Pinterest is partnering with other businesses to help it deliver a larger pool of ads to its users. These partners include Amazon and Alphabet-owned Google. For example, Pinterest shows Amazon's ads to users. When a user clicks on these ads, they are taken to Amazon to buy.
Through these efforts, Pinterest's global ARPU ticked up from 2022's $6.36 to $6.44 by the end of 2023. More importantly, ARPU in North America rose from $24.38 in 2022 to $25.52 last year. This region generated $2.4 billion of Pinterest's $3.1 billion in 2023 revenue.
Yet despite its sales growth, Pinterest is not profitable. The company exited 2023 with a net loss of $35.6 million. However, achieving profitable growth is one of Pinterest's key business priorities.
As part of this, the company performed cost cuts in 2023, and consequently, its net loss last year was a 63% improvement over the prior year's loss of $96 million.
Moreover, the company exited 2023 with a spectacular balance sheet. Its total assets of $3.6 billion far exceeded total liabilities of $503.7 million. Its cash, cash equivalents, and marketable securities alone were $2.5 billion.
Deciding whether to buy Pinterest shares
So far, Pinterest has seen success under Bill Ready, and the company expects continued growth in 2024. Pinterest forecasts Q1 revenue to reach at least $690 million, a double-digit increase from 2022's $603 million.
The company is showing positive momentum, and that's helped its stock price. In fact, the median share price target among Wall Street analysts is $44.30, and the current consensus among these analysts is an overweight rating for Pinterest stock.
The one question is whether Pinterest can capture greater ARPU growth outside of North America. Ready noted about 80% of Pinterest's users are located internationally yet represent only 20% of revenue.
The company is hoping to see international ARPU gains over time through its Google and Amazon partnerships. Pinterest is also working on additional partnerships to help deliver international ARPU growth.
Its rising MAUs, strategies for increasing ARPU, and solid financials show Pinterest is on the right track under Ready. This makes Pinterest stock a worthwhile long-term investment as the company continues to push toward greater revenue growth and profitability over the next three to five years.
