Proprietary Data Insights
Financial Pros Top Social Media Stock Searches Last Month
A Social Media Stock Worth a Look
Ever since Elon Musk made an offer to buy Twitter (TWTR), investors have wondered if any of the other battered social media stocks could be worthy of acquisition.
While we don’t think Elon will make a play for another social media company if his bid for TWTR fails…
…we’ve uncovered one stock, which we believe has a better business model, and is priced fairly enough to be considered a stock in your portfolio.
Pinterest (PINS) was the subject of an acquisition by PayPal (PYPL) last year. Ultimately, the deal fell through.
Since then, interest has waned relative to other social media stocks.
In fact, Pinterest barely makes it into the top 5 social media searches by financial pros.
But, that may be for the best.
You see, the company boasts an insane gross profit margin. And its P/E ratio isn’t out of control.
That’s why we believe this stock deserves your attention.
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Pinterest Inc (PINS) Business
PINS is a social media app that allows people to find inspiration for their lives. For example, many users hop onto the app to find recipes, style and home inspiration, DIY, and others by playing “Pins” on their board.
People have saved more than 300 billion Pins across a range of interests. The app has more than 400 million monthly active users.
The firm continues to see engagement among its users, as shown by its average revenue per user metrics, which have shown an impressive rise over the last two years.
Like other social media companies, the firm generates the majority of its revenues from advertisers.
PINS saw significant growth over the last three years, reaching $2.5B in revenue in 2021, a big jump from 2019’s $1.1B in revenue.
Despite its surge in business, PINS has managed to improve its gross margin percentage, which sits at an incredible 79.5%.
PINS has a price to cash flow of 19.2x, which is rich when you consider the sector median is 9.5x.
Furthermore, PINS has free cash flow of $744m. In other words, it has $744M of cash left over after it pays for its operating expenses and capital expenditures or $0.94 per share.
The company’s current ratio of 12.25x means its assets are 12.25 times greater than its short-term liabilities, giving it access to deep pools of liquidity.
This is emphasized by PINS’ quick ratio of 12.06x. That means its highly liquid assets are 12 times greater than its short-term liabilities.
The firm has a reasonable debt-to-equity ratio of 0.07x.
And unlike some social media companies, PINS generates an EPS profit.
PINS is not a cheap stock by any stretch of the imagination. It trades at a price to sales ratio of 5.42x, which is significantly higher than the sector median of 1.66x.
Furthermore, its price to cash flow ratio is 19.2x, which is higher than the sector median of 9.5x.
The P/E (Non-GAAP) ratio for PLTR is 19.32x which is not bad when you consider the sector median is 15.54x.
One thing which can’t be denied is the firm’s growth, which grew 52% year over year. Its working capital growth improved by 35.7% year over year, which is a lot better than the sector median of 5.6%
PINS had a gross profit margin of 79.4% in 2021, which is outstanding compared to the sector median of 50.8%
And its net income margin is 12.2%, which is again, above the sector median of 5%
Our Opinion – 8/10
PINS has seen its shares get decimated over the last six months. And while valuations may appear to be high, the firm has done an excellent job at growing its business.
At its current valuation, we believe it’s worth the risk. And believe over the 12-24 months, shares will be trading significantly higher.
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