Analyzing Pinterest Stock: Discovering Potential Upside and Growth Strategies
The key to Pinterest's upside
As a type of social media platform, Pinterest would ideally grow its user base. More eyeballs are always better. However, with nearly 500 million monthly active users as of the end of 2023, it's not absolutely essential for the company to grow its user base. It can still be a winning investment if it better monetizes what it has.
Pinterest's monetization potential
Pinterest mostly monetizes its audience by displaying ads and it undoubtedly has room to improve. Consider that Meta Platforms' Facebook made $44.60 per active user in 2023. For comparison, Pinterest only made $6.44 per active user in 2023.
Operating expenses and profit margins
For the stock to have upside, Pinterest can't only grow its revenue; it must also grow its profits. If it can improve monetization rates, then its gross profit margin should logically improve. Moreover, Pinterest's management needs to keep operating expenses in check to improve this stock's chances of beating the market.
What's going right for Pinterest
Ready has made some fundamental changes to Pinterest, including securing partnerships with big-time tech titans. Its two recent partnerships are with e-commerce giant Amazon and advertising behemoth Alphabet, the parent company of Google. Amazon is pushing advertisements from its third-party merchants onto Pinterest's platform in an effort to increase sales conversions.
- The benefit for Pinterest is two-fold.
- First, it increases ad supply on its platform, which can push revenue per ad slot higher.
- Second, it reduces its expenses because it's increasing its supply of ads without spending heavily on sales and marketing.
In conclusion, it's important for Pinterest's revenue to climb and for expenses to remain under control so that its profits can go up and support upside with the stock. To do this, the company needs to improve monetization. And as I've explained, partnerships with Amazon and Google can help in that regard.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.