6/24/2023 0 Comments Pinterest stock price target![]() If PINS is unable to return to MAUs growth, then there is considerable downside and I would not be favorable on the stock at current prices. While ARPU growth can likely persist for many years, I view MAUs growth as being the most important indication of sustainable growth. ![]() My thesis counts on PINS returning to consistent MAUs growth moving forward. Using a 20% projected growth rate and 1.5x PEG ratio, I could see PINS trading at 11x 2022 sales, or $55 per share, representing 50% upside. I expect PINS to earn 35% long term net margins. Based on the strong balance sheet and cash generation profile, I view a price to earnings growth ratio ('PEG') of 1.5x to 2.0x to be reasonable. Put these altogether, and I view the stock as being moderately undervalued at current prices. PINS also has $2.3 billion in cash and equivalents, making up nearly 10% of its market cap. PINS is generating significant positive cash flow, which helps de-risk its profile relative to cash guzzling tech peers. Sure, adjusted EBITDA is not the same as GAAP net income, but PINS has no debt and minimal maintenance expenses, making adjusted EBITDA very close to free cash flow. Further, one could argue that the stock deserves a premium multiple due to the solid profitability, as evidenced by the 32% adjusted EBITDA margin. That said, is the stock cheap enough? At under 4x 2026e sales, the multiple is not commanding. Consensus estimates call for a steep deceleration in growth rates over the coming years. What's my opinion? Is PINS Stock A Buy, Sell, Or Hold?Īt recent prices, the stock more than reflects the new reality that PINS isn't a top tier social networking play. My Seeking Alpha peers are more solidly bullish with an average 4.08 rating out of 5. In spite of the discrepancy between the price target and stock price, Wall Street analysts are only mildly bullish with an average 3.7 rating out of 5. ![]() ( Seeking Alpha) Is Pinterest Expected To Rise? Wall Street believes the stock is undervalued, as the average price target of $54 per share represents nearly 50% upside. The stock price prior to the crash was not particularly compelling based on the forward outlook, but the stock has fallen over 50% from highs. Still though, PINS managed to drive solid average revenue per user ('ARPU') growth, as ARPU remains low relative to peers.Ĭompounding the issues, PINS guided for the next quarter to see growth in the high teens percentage range on an year-over-year basis - representing even more sequential deceleration. While it is true that PINS is lapping some tough comparables, social networking peers Facebook ( FB) and Snapchat ( SNAP) did not experience the same sequential declines, indicating that this may be something specific to the company. Monthly active users ('MAUs') grew only 1% year-over-year and declined sequentially. That removed any potential M&A induced price floor, as analysts focused on this concerning metric. First, rumors had surfaced that PayPal ( PYPL) seeked to acquire PINS, but then PYPL backed out. Sure, that 43% mark represented steep sequential deceleration in growth rates, but PINS wasn't trading at obviously egregious valuations prior to the fall. If you were to only look at the 43% revenue growth rate, you might not think that the stock should have dropped so much. While the decline is understandable, the stock now presents a potential buying opportunity. The stock now trades at less than half of all time highs. Like much of tech, PINS closed out 2021 with a return to gravity. I rate the stock a buy with up to 50% upside over the coming 12 months. Wall Street is not giving enough credit to the strong balance sheet and cash flow generation. PINS has underperformed peers in sustaining user growth, but the current stock price has priced this in. ![]() Unlike other social networking stocks which have remained hot, Pinterest ( NYSE: PINS) has undergone its own stock price crash as the stock has more than halved in a matter of months. ![]()
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