Implementing Apple’s anti-tracking system has cost Facebook and Snapchat billions of dollars, while undermining the entire social media model. At a time when everyone is collapsing on the stock market, another is sticking its head out of the water. Pinterest, in 2022, is an important case to look into. Soon bigger than the Snap group, it is nonetheless the prey of the biggest technology companies like PayPal. In the shadow of sight, the future of the platform launched in 2010 will be decided in the coming months.
Back on track
On Wall Street, Pinterest’s price is holding up. The photo sharing platform denotes what its competitors have been experiencing for months: the cold shower. There will be a long way to go before Pinterest can claim to be back at its 2021 highs (down 70% since then), but the company is showing solid accounts and investors are responding to the call. Although trading volumes are lower than at other tech companies, Pinterest stock has still jumped 30% since early June.
The trend is not the same for Facebook and Snap. Over the same period, their shares lost 30% and 15% respectively. Declines that follow since the beginning of the year. We remember the evening of February 2, when Facebook lost a third of its valuation, after the publication of the results of its last quarter – far from expectations. Behind these figures, two explanations: a difficulty in finding new users and especially in monetizing them. With Apple’s discontinuation of activity tracking (iOS 14) Facebook and Snap could no longer precisely target the ads sent to everyone.
Pinterest, for its part, is not affected by this penalty. And for a very simple reason. The platform does not depend on any other to know what it wants to know about its users. Pinterest knows its community well in terms of what they want to buy. On this point lies its model. To target the ads shown to each of its users, Pinterest only has to look at their searches and activity on the app. Knowing that users come to search for keywords or look at image galleries with a (nearly or remotely) commercial purpose, Pinterest does not need to look at their activity elsewhere.
Result, the economic health of Pinterest is good. Its cash flow is positive at $333 million over the past six months, with $2.5 billion in cash. Head of ETF Compound Kings Robert Cantwell, interviewed by Bloomberg, called the company a “disruptive asset, with incredibly high margins”. It’s hard to believe, especially at a time when the markets are generally gloomy and inflation has led to a real slowdown in demand, including in digital advertising. However, Pinterest is in good shape with 433 million users and revenue per user up 17%.
The threat of a takeover
Along with appearing to be the best and strongest performer in the social media market, Pinterest is also the smallest, and somehow the most vulnerable. Facebook can spend billions of dollars in the metaverse without finding the desired profitability, investors will continue to trust it until the end. For Pinterest, this end of the year is decisive. At the announcement of results below expectations, it would then be necessary to consider the buyout. And until then, the price increases of Pinterest on the stock market hide the motivation of many investors to see the company swallowed up by a bigger one. It’s not for nothing that between October 2021 and February 2022, Pinterest stock soared 100% amid rumors of a takeover by PayPal.
Pinterest’s accounts are solid, but its model is struggling to find something to innovate. Millions of dollars are spent in 2022 to find new solutions in purchasing integration and the use of artificial intelligence, but for now, no return on investment. The company must be careful as the red zone is not very far, especially in times of recession. It brought its operating losses to 5% of its sales. An indicator that tends to pull Pinterest down on the stock market, especially since investors do not have clear information on the growth objectives of its user base. If it were to no longer be able to invest up to what it would like, then a buyout could be essential. Pinterest has chosen to turn to public markets since 2019 and must now assume its choices. For others, priced at just $22, Pinterest stock would be a risky but not-to-be-missed opportunity.
Recently, analysts at the investment bank Goldman Sachs decided to revise their Pinterest ratings and expectations upwards. They moved from Neutral to Buy, for a price target of $31. The reason, in particular, concerns the arrival of a new CEO, Bill Ready. He is a big name in his field after having proven himself within Google to develop its mobile payment system and at PayPal as director of operations. With Pinterest, it exudes excitement for many who are already seeing the e-commerce strategy solidify. The famous New York investment fund Elliott Management has also acquired a large stake in the company following this announcement. The Pinterest action then rose from 17 to more than 25 dollars.
The arrival of Bill Ready signaled the end of the Ben Silbermann era. The co-founder and former CEO of Pinterest stepped down and took over as CEO, much like Jeff Bezos did with Amazon last year. A real trend among large American companies. “In our next chapter, we’ll focus on helping people buy and try out all the great ideas they see on Pinterest. Bill Ready is an excellent leader for this transition. He is a builder who deeply understands commerce and payments”said Ben Silbermann.“There’s no better time to join Pinterest”exclaimed the new CEO.