Since its initial public offering (IPO) in 2019, Pinterest stock (NYSE:PINS) has taken investors on a wild trip. The stock of the social network business skyrocketed shortly after its public debut due to pandemic tailwinds and market-wide momentum for growth companies. However, fortunes shifted as engagement tailwinds faded and investors deserted growth-dependent tech companies.
Pinterest stock (NYSE:PINS) is already down 4% from the market close on the day of its IPO, and it has lost almost three-quarters of its value since reaching a career-high of more than $89 per share in February 2021.
Pinterest Stock Bull Case: Take advantage of the discount in this scenario.
Pinterest stock (NYSE:PINS), like the rest of the social media industry, has been heavily impacted by this year’s market sell-off.
First, its user base may be stabilizing after multiple quarters of losses. Monthly active users (MAUs) were 433 million in the second quarter, the same as in the first, paving the path for a return to growth. Analysts at Goldman Sachs recently upgraded the stock, citing stronger user growth patterns.
Pinterest stock (NYSE:PINS) seems to be quite fairly priced based on the stock price, and it’s near-75% drop from its high last year. Its price-to-earnings (P/E) ratio is 40, based on $0.57 in adjusted earnings per share for the year.
With the short-term challenges seeming to be receding, the company might soon accelerate. If it does, the stock has a lot of room for growth ahead of it.
Pinterest Stock Bear case: A company recovery is not guaranteed.
Noonan, Keith: Pinterest’s social media network garnered a significant user base, but it seems that future growth will be considerably more difficult to achieve. While the company’s monthly active user count was about 433 million in Q2, it was down 5% year over year, and it’s unclear if the firm can return to significant MAU growth. The firm has been losing users in North America and Europe while gaining users in other foreign areas, which would likely continue to put pressure on profitability if the pattern continues.
Although the corporation is seeing some progress in increasing digital advertising revenues and total average income per user, macroeconomic headwinds might stymie those gains. With the possibility of a lengthy recession approaching, marketers may cut down on spending, causing Pinterest’s business performance to be worse than expected.
While the firm has been consistently profitable on an adjusted basis, Pinterest stock (NYSE:PINS) value remains growth-dependent. Non-GAAP (adjusted) net income decreased 54% year on year in Q2, and the combination of macroeconomic headwinds and MAU trends might fuel more negative momentum. With the firm reporting dismal single-digit sales growth and deteriorating profitability, Pinterest stock might fall further if economic circumstances continue to squeeze the business or cause sell-offs in growth companies in general.
Should you invest in Pinterest stock?
Recent sell-offs may give an opportunity for investors who see value in the company’s platform and big user base to purchase Pinterest stock (NYSE:PINS) at deeply reduced rates.
Investors who are worried about the user-base picture or the potential for macroeconomic headwinds to disrupt the company’s growth plans should certainly proceed with caution. Pinterest has established an amazing social networking firm, and sell-offs have reduced its value to levels that allow for significant upside, but some significant dangers remain.
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Author Okoro Chinedu 
