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Bull of the Day: Pinterest (PINS)

Jeremy Mullin

Pinterest (PINS) is a Zacks Rank #1 (Strong Buy) that is a popular website seeing a lot of momentum in the current lockdown environment. The platform allows users to discover ideas like daily activities, remodeling the home, hobbies, or even planning weddings and vacations. Stay at home orders have users flocking to the site, which has helped with revenue expectations. The stock has recently pulled back, bringing it to attractive levels for long-term investors.

The COVID Effect

As most of us are still under stay-at home orders, we are going crazy trying to figure out how to pass the time. You can only watch so much TV and too much social media will make you go insane. And eventually, we all will need a break from reading all the excellent content on Zacks.com.

When the quarantine fatigue settles in, we will look elsewhere to make the lockdown experience tolerable. This is where Pinterest comes in. The website is a great place for DIY projects like remodeling a bedroom, creating a garden, or getting ideas for painting your house. Additionally, there are tons of great cooking recipes and other ideas to keep busy.

Recent Earnings Activity

The company guided in early April and reported EPS in early May. After the guide, the stock ripped higher and after the EPS is was sold back down to April lows. This volatility is giving investors headaches so let’s look into the numbers.

The April guide saw revenue for Q1 at $269-272M vs the $259M expected. The also reported global monthly active users a 365-67 million.The guide was well recieved and caused the stock to rally. 

In May, EPS came in with a surprise miss to the downside of 25%, the first miss in a year. This took the optimism away from the guide and the stock was sold. However, the revenue came in at $271.9M, so it wasn’t far off form the guide. Investors were just expecting more on that bottom line.

Here is a quote from the CEO on the quarter: “

“We began 2020 on strong footing. The spread of COVID-19 has certainly had an impact on our business and the businesses of our advertisers, but we remain optimistic about the future,” said Todd Morgenfeld, CFO, Pinterest. “While we’ve been adapting to the current environment, we will continue to invest in our strategic priorities of content, ads diversification, use case expansion and shopping. We’re committed to delivering inspiration to our users and measurable results to businesses.” 

So, while the ad portion of their business isn’t COVID proof, they are shifting their strategy. One example of this is a recent partnership with Shopify, which will give over one million merchants a quick way to upload catalogs to Pinterest.

The Technical Take

The stock was pummeled in March like everything else, bottoming right at the $10 level. From there, the stock doubled and moved over $20, before the earnings outlook knocked the stock back down.

The move higher almost kissed the 200-day moving average, but the resistance was too much. The stock has now pulled back to the 50-day moving average and looks to be finding support. This is also the halfway back point from the March lows to recent highs. Current levels look technically attractive for a long-term buy. If the stock can break that 200-day moving average, we could see acceleration higher to the 2020 highs above $25.  

In Summary

While there are some short-term effects due to COVID, Pinterest is a website that users are flocking to during the stay-at-home orders. If consumers become accustomed to using the site, the company should benefit long-term. In addition, finding new strategies like the one with Shopify offer exciting opportunity for the company and investors.

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