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Pinterest Is My Top Social Media Stock Right Now

By Parkev Tatevosian, CFA and Connor Allen – Updated Mar 28, 2022 at 3:15AM

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The image-based app is starting to monetize its international user base.

Social media stocks are beneficiaries of advertising spending increasingly shifting to digital channels. Pinterest (PINS -0.51%) boasts hundreds of millions of monthly visitors to its platform, and marketers are willing to pay to gain their attention. In this segment from "The Five" recorded on Dec. 14, contributor Connor Allen discusses why Pinterest is his favorite social media stock


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Connor Allen: I also have a digital advertising pick in Pinterest. But it's also a social media pick because Pinterest is a form of social media and digital advertising. Pinterest is a company that is basically your one-stop-shop for creative ideas. If you buy a home, if you add onto your home, you go into an apartment and you're wondering how to decorate or what you should add in there. Where does that everybody go, everybody goes to Pinterest and there's not really anything else out there that's like Pinterest. They are only show out there for what they do exactly.

They make money, not from their users, but they collect data. They target users with advertisers. They collect money from digital advertisers that are trying to get out to all the users that they have. They have a really great brand. Like I said earlier, there's really nobody else that's doing what they're doing. They also have pretty strong user growth up until the past few quarters. Past two quarters have not looked great for Pinterest as far as user growth goes. A lot of that was probably some demand that was pulled forward throughout the pandemic over the past few years.

It's crazy to even say that the pandemic's past few years now because I guess it almost is. But some growth opportunities that they have is a partnership with Shopify (SHOP -1.77%). We have yet to see the effects of what that partnership is going to be like. I'm excited to see what that might entail in the future. But another growth opportunity for them is their international space that they were working. Most of their users are international. Yet the revenue that they collect is when it's domestic. The domestic users, they collect about four dollars per user, its average revenue per user, ARPU.

Then international users, they're collecting about a quarter per international user. This data is a little bit older and may have changed in the recent quarter, I don't know. But if they can increase the monetization, even if they have slower growth like they have the past few quarters, but they can increase the monetization of the international users, I think it could be a pretty exciting stock for the future of social media and digital advertising. That's my pick.

Connor Allen owns Pinterest and Shopify. Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool owns and recommends Pinterest and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

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