Pinterest (PINS +1.36%) has been a poster child for the tech collapse in recent months. Shares of the image-based discovery engine have fallen by as much as 73% from their peak last February as its user base declined as the economy reopened and people spent more time out of the house.
In its fourth-quarter earnings report out on Feb. 3, Pinterest earned a golf clap from the market. The stock jumped 11% on Friday as the company beat estimates, but when you include its 10% drop from the day prior following Meta Platforms' disastrous earnings report, the stock was basically unchanged.
Investors should be pleased with the latest round of results, especially with signs that user growth has returned in the current quarter. Yet there was one under-the-radar part of the report that gives a big hint about where Pinterest is headed and its future potential.
Image source: Pinterest.
Pinterest Predicts
At the top of the latest shareholder letter, Pinterest shared a set of predictions for 2022 it calls Pinterest Predicts. This isn't the first time Pinterest has released such a list. In fact, it said eight of its 10 predictions for 2021 came true.
For 2022, it sees vibrant outfits and colors like electric blue trending, as well as celestial celebrations, and even goth style. The predictions range from fashion to beauty to celebrations, home, pets, wellness, and even cars and entrepreneurship. For most readers, the predictions may just be an interesting perspective on what's trending, but for advertisers, they hold tremendous value. Also, Pinterest Predicts shows the unique power of its platform, where users search for things they're interested in to get inspiration.
As the company explains, "People use Pinterest to plan for the future. That means we know what's next."
In each of the last two years, 80% of its predictions have been accurate, and trends tend to have more longevity on its platform than other social media companies, where posts are often scrolled chronologically. That also gives an advantage to creators on Pinterest as their posts don't have a shelf life the way they do on other platforms.
The big picture
Predicting trends is just one part of where Pinterest's strategy is headed, focused on building a lifestyle publishing platform to inspire people and help them make plans and take action. The company is building a full-funnel shopping experience, navigating Pinners from awareness to purchase, a natural fit for advertisers.
In the last couple of years, Pinterest has made significant strides toward enabling e-commerce directly on its site. It launched shopping in 13 international markets last year, and catalog uploads doubled in the fourth quarter. In 2022, it's focused on seamless checkout, building payments into its platform.
Unlike a traditional social media company, Pinterest isn't focused on connecting users to other people, but connecting them to inspiring ideas, experiences, and products. In its fully realized form, that vision works best as a fully integrated discovery and e-commerce platform both for Pinners and the advertisers that drive its business.
While the stock was battered in 2021, the future still looks promising for Pinterest, and the rebound in its user base should help reassure investors. Currently, the stock trades at a forward price-to-earnings ratio of just 28, essentially equal to that of the S&P 500. For a unique, high-margin business straddling social media and e-commerce, that price looks like a steal.
