The current macroeconomic environment has hit growth investors particularly hard. In fact, the S&P 500 Growth Index has entered correction territory, as it currently sits 14% below its all-time high. However, many individual stocks have fallen much further. For instance, Coinbase Global (COIN -0.34%) and Pinterest (PINS -0.64%) have dropped 47% and 70%, respectively.
However, some of Wall Street's brightest stock pickers think the selling has gone too far. In fact, Oppenheimer analyst Owen Lau has a price target of $377 on Coinbase, implying 98% upside in the near term. And Piper Sandler analyst Thomas Champion has a price target of $53 on Pinterest, also implying 98% upside. Clearly, these finance professionals see something they like in these growth stocks, so let's take a closer look at both companies.
Here's what you should know.
Image source: Getty Images.
1. Coinbase Global
Coinbase is the largest U.S. cryptocurrency exchange. Its platform helps retail traders, financial institutions, and ecosystem partners engage with the cryptoeconomy in a variety of ways. Of particular note, Coinbase enables investors to buy, sell, spend, store, and stake digital assets, and it generates the majority of its revenue from transaction fees, meaning it benefits from volatility in the crypto market.
Trust and scale are two of Coinbase's greatest assets. The platform has never lost customer funds due to a security breach, and the company grew its user base 107% to 89 million last year. To that end, as of Dec. 31, Coinbase held a market-leading 11.5% of all crypto assets on its platform, creating a deep pool of liquidity with which it can fund growth projects, such as integrating with new blockchains or adding support for new digital assets.
Last year, monthly transacting users surged 307% to 11.4 million, and trading volume skyrocketed 766% to $1.7 trillion. That growth was driven by strength across both retail traders and institutional investors, and it translated into an impressive financial performance. Revenue rose 514% to $7.8 billion, and earnings according to generally accepted accounting principles (GAAP) soared 936% to $14.50 per diluted share.
Going forward, Coinbase's future is tied to the fate of the cryptoeconomy. Since peaking at $3.1 trillion in November, the crypto market has fallen 41% from its high. Similarly, Coinbase stock also peaked in November, and it has since fallen 47% from its high. So if you're bullish on the future of cryptocurrency, Coinbase is a great way to tap into that trend. And if the cryptoeconomy gets its second wind in 2022, this stock could certainly jump 97% (or more) over the next 12 months.
2. Pinterest
Pinterest is a social platform for inspiration. Rather than connecting friends and families, it connects users with media content like images and videos, helping them find ideas, learn new skills, and shop for trendy products. To do that, Pinterest leans on artificial intelligence to personalize the experience for each user, turning their tastes and preferences into relevant content recommendations.
According to Sprout Social, 89% of people come to Pinterest for purchase inspiration, meaning they are actively looking to buy a product. Yet 97% of Pinterest searches are unbranded, meaning those people don't have a specific product in mind. That creates a great environment for digital ads, and it results in a powerful network effect. As more people look for inspiration on Pinterest, more brands will upload their product catalogs, giving people access to even more inspirational content.
Despite that value proposition, Pinterest saw engagement decline last year as pandemic-driven lockdowns and social distancing orders were lifted. Monthly active users (MAUs) fell 6% to 431 million. Even so, revenue rose 52% to $2.6 billion, and the company posted free cash flow of $743.9 million, up from $11.4 million in the prior year. More importantly, the future still looks bright for Pinterest. Global digital ad spend will hit $570 billion this year, according to eMarketer, and management is executing on a smart growth strategy.
In 2021, Pinterest added new ways for consumers to shop on the platform, and it simplified the catalog upload process for brands. Additionally, the company started piloting an on-platform checkout solution to reduce friction between buyers and sellers. Collectively, those moves could be a game changer, as they extend Pinterest's addressable market from digitals ads to digital payments. For context, eMarketer believes U.S. social commerce spend will surpass $45 billion this year.
If Pinterest's growth strategy pays off, it's easy to imagine the share price doubling over the next 12 months. And with the stock currently trading at seven times sales -- quite a bit cheaper than its historical average of 15.7 times sales -- now could be a great time to invest.
