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Why Pinterest Stock Is Up 19% Through the First Half of the Year

By Jeremy Bowman – Jul 3, 2020 at 7:11PM

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Shares of the virtual pinboard gained as it emerged from the market crash with solid momentum.

What happened

After crashing during the coronavirus sell-off in March, shares of Pinterest (PINS 1.43%) bounced back and finished the first half of the year up 19%, according to data from S&P Global Market Intelligence.

While the company's advertising business has been challenged by the crisis, investors have enthusiastically returned to growth stocks like Pinterest, believing that the crisis will accelerate a shift in advertising spending to digital platforms like the virtual pinboard.  

As you can see from the chart below, the stock gave up nearly half of its value from the start of the year before climbing out of the chasm. 

PINS Chart

PINS data by YCharts.

So what

Pinterest kicked off the year with solid momentum. The stock jumped on Jan. 14 when eMarketer said it passed Snapchat to become the third-biggest social media app in the country, finishing 2019 with a projected 82.4 million users in the U.S. The research firm also predicted that the gap between the two apps would widen over the coming years, with Pinterest reaching 90.1 million domestic users by 2022.

An iPad showing a Pinterest board.

Image source: Pinterest.

The company tacked on another double-digit bump in early February after posting a better-than-expected fourth-quarter earnings report. Revenue jumped 46% to $400 million, well ahead of estimates at $372.2 million, and global monthly active users grew 26% to 335 million.  

But the stock then peaked, and soon after fell sharply along with the market crash as the coronavirus pandemic hit the U.S. Shares surged in early April when the company said that traffic on the site had been strong during the crisis, with record levels of engagement even as revenue trends declined in mid-March. It also withdrew its guidance for the year.

The stock got a boost toward the end of April when Snap posted better-than-expected results in its first-quarter earnings report, but then it pulled back on its own earnings report in early May before steadily gaining along with the broad market recovery to close out the second quarter.

Now what

Pinterest shares have tacked on another 9% in the first two sessions of July after Facebook said it would pull the plug on its rival service, Hobbi, and on strong employment growth in June, another data point indicating a robust recovery.

Pinterest looks well positioned for the long term, but the company's recovery may be uneven because the ad market may not return to full strength until the pandemic is over. Keep an eye on the Facebook ad boycott, which could be a boon for Pinterest if it can attract those disgruntled advertisers.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Facebook and Pinterest. The Motley Fool owns shares of and recommends Facebook and Pinterest. The Motley Fool has a disclosure policy.

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