Considering that Pinterest’s shares dropped by about 38% in 2013, you may be wondering whether it’s an excellent time to buy shares in the company. This article will look at the company’s business model, what it can do for investors, and what Wall Street analysts are saying about its stock.
Pinterest Inc. (NASDAQ:PINS)
During its most recent fiscal quarter, Pinterest Inc. (NASDAQ:PINS) generated $261 million in revenues, an increase of 62% over the same period last year. Additionally, the company generated $0.69 in earnings per share. In addition, the company announced that it had opened a new office in Warschau, Poland.
The company also rolled out more e-commerce features. Although it is unclear whether these will significantly impact the company’s bottom line, it is worth noting that it is now in a position to offer its services to more than 300 million monthly active users. In addition, the company is also rolling out more “micro-shopping” opportunities, such as mobile payment options.
Pinterest also took the opportunity to announce the first European technical center. This is not to be confused with the new London office. The company’s CEO is Ali Parsa, who has been tasked with overseeing the operation. In other news, Pinterest has added a few more users, making it one of the world’s largest photo-sharing sites.
Pinterest’s business model
Currently, Pinterest earns through advertisements. These ads target users based on their interests and demographics. This makes it easier for advertisers to target potential customers.
For instance, a bridal dress company can target ads to users planning a wedding. Likewise, an interior decorator can advertise to people designing a new home. The platform allows brands to identify consumers with similar interests. Eventually, these businesses could build a sustainable business model.
Promoted Pins are native ad units that are placed on the site. They are designed to increase brand awareness and drive traffic to a website. They operate as cost-per-click ads. They are targeted by location, device, and demographics. They are intended to be similar to user-generated pins. They are also designed to capture purchase intent.
Other ad units include Product Pins and Paid Partnerships. These ads enable users to buy products directly on the site. They are available to merchants that use BigCommerce or Salesforce.
Shares of Pinterest are down around 38% this year.
Earlier this week, Pinterest shares dropped around 38%, taking the company’s stock price down more than 65% in the last 52 weeks. The decline came as social media stocks took a hit due to concerns about the coming recession, which could negatively affect advertising spending.
The company is ad-driven and relies on its users to monetize the site. While the company is free to join, advertisers pay to display ads on the site. However, it loses money if a user does not spend significant time on the platform. As a result, Pinterest needs to increase its average revenue per user (ARPU) to become profitable.
Pinterest expects its expenses to increase in the fourth quarter of this year by low double digits. This is due to a decline in its active user count, which has decreased over the past three quarters.
However, Pinterest’s revenue growth remained stable in the second quarter. The company also confirmed that Work-From-Home tailwinds were affecting its revenues.