Should You Buy Pinterest Stock?

  • July 9, 2020

Should you buy Pinterest stock? With a $13.7 billion market value, this social media network is a force to be reckoned with. And by the looks of it, they're not going anywhere any time soon. 

Should You Buy Pinterest Stock

With that in mind, if you're looking to buy stock in Pinterest, you will want to keep reading. This is one stock to take a hard look at. 

Can I Buy Pinterest Stock Today?

  • Can you buy Pinterest stock today? The good news is yes! Pinterest is a publicly traded stock on the major exchanges. The other question however, would be should you buy Pinterest stock today? That's where reading more here can help to answer that question. 

1. What Is Pinterest?

Founded in 2010, Pinterest is an image-sharing social media site. At the same time, users can collect links and create virtual pinboards based on their interests.

I must admit, with 60+ boards, I'm a self-proclaimed interest junkie. With topics from cooking to my wedding (FYI - I'm not engaged nor is there a prince charming in my life, but hey, I like to plan), my planning options are endless.

Pinterest fulfills my need to neurotically organize my life into very neat boxes, so thank you for that! Maybe Pinterest stock would be a good buy for me now that I think about it. 

However, I need to make sure of it. Hence taking the free online trading courses offered by the Bullish Bears. But should you buy Pinterest stock?

2. Fun Facts About Pinterest

  • Monthly Users: 335 million +
  • Total Number Pins: 200 billion
  • More than 14 million articles get pinned each day
  • Retailers can reach 144.5 million people without advertising
  • Pinterest generated 1.03 billion U.S. dollars in advertising (2019).
  • Shares at their IPO on April 18, 2019, went for $19 each.
  • Q4 2019 global revenue was $400 million, with 46% growth year-over-year.
  • 2019 revenue grew 51% year over year to $1,143 million.

3. What Happened to Pinterest Stock Price on April 8?

Shares of Pinterest (NYSE: PINS) gapped up 12%  on April 8th. I suspect, and most would agree it was due to preliminary first-quarter earnings results.

In addition to soaring share prices, we have rising usage as well. I hasten to add; this comes as no surprise since we're stuck at home.

CEO Ben Silbermann said that engagement on the platform is soaring to record levels. Many Pinners are looking for ideas and projects while they stay at home.

4. Let's Talk Earnings

Should you buy Pinterest stock? For most publicly traded companies, earnings are reported four times a year. To say these quarterly reports are highly anticipated is a gross understatement.

They are, in fact, the bread and butter of many investors. Depending on how the numbers shape up, they cause investors to bid up the stock's price or else pummel it down.

For better or for worse, companies are judged by their ability to beat market expectations and the analysts' forecasts. Put simply, all eyes are on whether or not the company "hit the bullseye."

In other words, they're judged on whether they hit the Wall Street analysts' consensus estimates or not. This knowledge is valuable as it helps investors navigate through the tumultuous quarterly earnings times. 

Without hesitation, I can tell you a company's ability to hit earnings estimates is vital to the price of its stock. Typically, when a company exceeds expectations, they're usually rewarded with an increase in its share price.

It seems like a no brainer to me. However, if a company falls short or even just meets expectations, the stock price can plummet.

Most certainly, beating earnings estimates tells us something about a stock's general well-being. Along the same token, any company that routinely exceeds expectations quarter-after-quarter is probably doing something right.

Should You Buy Pinterest Stock

Is Pinterest Stock a Good Buy?

  • Should you buy Pinterest stock? Looking at the chart I would say yes but wait for a pull back. Right now it's trading far away from the 9ema. Since I like to use the 9 ema as my entry point, I'd wait until price pulls abck and holds the 9. 

1. Earnings for Pinterest Stock

The earnings report was released on May 5, 2020. If you didn't already know, the earnings season is one of the most anticipated points during the financial year for the market.

We saw the price of PINS stock gap down for about a week before moving up. It's still heading up to this point.

Pinterest (PINS) was expected to deliver a year-over-year increase in earnings on higher revenues. Pinterest said it expects revenue for the first quarter to be "in the range of $269 million to $272 million."

However, they didn't offer an earnings outlook for the quarter. Analysts are expecting a loss of $49.6 million, or 8 cents a share, which represents a year-over-year change of +75%.

On a positive note, the company said it ended the first quarter with approximately $1.7 billion in cash and marketable securities. And with no financial debt and an untrapped $500 million revolving credit facility, I think they are in a good spot overall. 

2. Did Pinterest Have a Earnings Surprise?

I know I said above that hitting or missing earnings can be a reason why a stock moves higher or lower. But it's not the only reason.

Many stocks end up losing ground due to unforeseen circumstances or catalysts - COVID-19 anyone? Similarly, many stocks gain despite an earnings miss.

For these reasons, it's essential investors look at the whole picture (i.e. company fundamentals) before going long (or short). Therefore, should you buy Pinterest stock?

3. Somebody Knew Something

The market is always trying to tell us a story, it might not always be directly, but in many cases, it whispers. For those of you in the options arena, you might want to listen to the whispers.

On April 24, the May 8, 2020, $16.50 call option had some of the highest implied volatility of all equity options that day. 

Let me tell you why this is important: Implied volatility shows you how much the market is expected to move in the future. Now, which direction, up or down, we do not know. 

Needless to say, an option contract(s) with high levels of implied volatility suggests a few things. Firstly, investors in the underlying stocks are expecting a big price move in one direction or the other.

Alternatively, it could also mean a big event is coming up that could cause the stocks to rally or drastically sell-off. If you're wondering should you buy Pinterest stock, look at the options chain.

4. Extreme Volatility in Pinterest Call Options

So, how do we interpret the extreme volatility in Pinterest call options? Clearly, options traders were expecting a big move for Pinterest shares.

All of this is great but, which direction would it have move? To do this, you need to look at the whole picture, the companies fundamentals included. 

If you prefer to buy shares, make sure you know how to buy shares of stock

5. What Do the Analysts Think?

Should you buy Pinterst stock? They currently carries a Zacks Rank of #3 (Hold). Taken together, it makes it difficult to predict that Pinterest will beat the consensus estimate conclusively. 

But we have two interesting developments. For starters, two analysts increased their earnings estimates. And none of the other analysts dropped their earnings estimates. That must mean something?

Given the way analysts felt about Pinteres coupled with huge implied volatility could have meant something was brewing. Many times, options traders look for options with high levels of implied volatility to sell the premium. 

Most certainly, this is a strategy many experienced traders use because it captures time decay. The hope with this approach is that the underlying stock doesn't move as much as initially expected at expiration.

6. Should You Buy Pinterest Stock Based on Growth?

PINS stock has been rallying since COVID-19, and the rally is far from over. Pinterest is doing something very important: simultaneously improving the user interface while at the same time expanding advertising and e-commerce capabilities.

With this in mind, they are hoping to lay the foundation for significant sustained revenue growth. At the current moment, Pinterest is shaping up a lot more like Instagram than Twitter.

7. What's Happening Now?

Shares of the digital pinboard and shopping tool company had gained 35.66% in April. Here's another striking example to put things in perspective: Pinterest's gains outpaced the Computer and Technology sector's gain of 13.35% and the S&P 500's gain of 16.09% in that same period. 

On the contrary, Pinterest pulled its full-year outlook in the face of the ongoing COVID-19 pandemic and said its chief operating officer, Fran├žoise Brougher, is leaving the company.

In a statement by Pinterest, they indicated they are "currently not in a position to forecast the expected impact of COVID-19 on its financial and operating results for the remainder of 2020".

The company said first-quarter revenues were meeting its expectations until the middle of March, "when we began to see a sharp deceleration." All of this is no surprise considering we are in a pandemic. 

Now What?

In sum, what have we learned? First: with a Zacks rating of 3 (hold), it appears to be a wait and see. Second: with the substantial volatility in the May 8 calls, something is up. 

With this in mind, with any stock you purchase, you don't have to limit yourself to cheaper penny stocks. If you think Pinterest is too expensive at $26, let me tell you, it's not. You can easily control 100 shares in one option contract. 

Options don't have to be scary; they are less risky than buying shares outright. Check out our high-powered yet straightforward approach to secure winners. In addition to impressive profit potential, options can reduce your risk. 

Now is the time to get started, click here for our free options trading courseHappy trading!

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