Pinterest (PINS -0.59%) had a rough go of it in 2021. The company, which did exceptionally well at the onset of the pandemic, is experiencing an opposite fate as economies reopen. As a result, its stock is down 44% year to date in 2021.
Still, the image-based social media business hopes to do better in the new year. Let's look closer at its prospects and determine if Pinterest's stock has a chance to hit $100 in 2022.
Adding monthly active users is key
Topmost of the reasons for Pinterest's stock decline has been the downward trend in monthly active users (MAU) as economies reopened. In its most recent two quarters combined, Pinterest lost 24 million MAU. If Pinterest reaches $100 in 2022, it will likely need to reverse that trend meaningfully. Pinterest's app is free to join and use. It only makes money by showing advertisements to users -- and so if it can grow that user base, it can increase revenue. Naturally, marketers are willing to spend more if they can reach a greater audience.
Already, Pinterest is showing signs that the losses in MAU are reversing. Between the Sept. 30 end of its third quarter and Nov. 2, management says it added 3 million MAU. It may be too early to determine a definitive end to MAU losses, but this is undoubtedly a good sign.
Meanwhile, the company has sustained growth in the average revenue per user (ARPU). Pinterest posted an ARPU of $1.41 in Q3, up by 37% from the same quarter last year. This metric could get a boost in 2022 as supply-chain disruptions ease worldwide and Pinterest progresses in monetizing international users.
One challenge at the moment could be advertising revenue. That's because bottlenecks in the supply chain are limiting the capacity of businesses to produce goods. One coronavirus outbreak at a manufacturing facility could halt output for weeks. For businesses, that means less need for advertising in places like Pinterest right now.
International markets could provide opportunity. It's interesting to note that Pinterest's ARPU is far more significant in the U.S. than in the rest of the world -- nearly 15 times greater, to be precise. Some of that can be attributed to greater consumer purchasing power in the U.S. So advertisers are willing to pay more. However, Pinterest also has not yet built out its toolkit for monetizing international users in the way it has in the U.S. Management has made this an area of focus, and continued progress on this front could boost ARPU in 2022.
Can Pinterest's stock hit $100 in 2022?
As of this writing, Pinterest is trading at a little under $37 per share, down from almost $90 earlier in 2021. If Pinterest stock is to reach triple digits in 2022, it will almost certainly need to add something on the order of 25 million MAU -- depending on the geographical mix. It may also need to sustain the growth in ARPU at a similar, if not greater, rate than in 2021. The wildcard will be how it achieves user and ARPU growth. For instance, if it introduces an exciting, new feature that starts attracting millions of users, that could do more for the stock price than an increase in users without a new feature.
Overall, there is a chance that Pinterest stock could hit $100 in 2022; however, it is going to be a challenge to get there.