Pinterest (NYSE:PINS) was one of the companies that made big gains during the pandemic lockdowns of 2020. Consumers who couldn’t go out to shop instead posted and clicked on images of products they liked on Pinterest in droves. record. If you owned PINS shares in 2020, you enjoyed a very good 254% ROI that year.
However, 2021 did not go the same way. With consumers putting their devices aside to leave their homes, Pinterest has seen its US user base decline from 2020 levels.
The PINS stock suffered as a result. It was already a tumultuous year when the company released its second quarter results on July 29.
Despite a 125% year-over-year increase in revenue for the quarter, Pinterest stock plunged 18%. At this point, stocks are trading at around $ 53, a bit higher than 2021 lows and down 21% year-to-date.
But if you look past the panic over the decline in US users (I’ll explain why you should do this in a moment), then the downtrodden PINS stock is actually an interesting opportunity.
Growth abroad is key to long-term growth of PINS stock
A few days ago, I wrote about a key factor in PINS’s long-term growth equation: international users. It is worth revisiting and digging into this matter further, as many potential investors are clinging to the company’s post-containment, which is squeezing the numbers in the United States.
In its second quarter results, Pinterest reported that US MAUs (monthly active users) were down 5%. Worse yet, this drop had fallen to 7% as of July 27. Panic attack. The PINS stock plummeted.
However, what has received less attention is the fact that international MAUs increase 13% over the same period. Because the rest of the world is a much larger market than the United States, the net number of active Pinterest users around the world increase 9% accordingly.
Part of the panic over the loss of US users is that each US MAU generates more revenue than an international MAU. In the second quarter, it was 36 cents per international MAU compared to $ 5.08 for a US MAU. You can see why the panic over a decline in US users.
However, look further and you will find that the international ARPU (average revenue per user) has increased by 163% year over year. In the third quarter of 2020, international revenue was $ 41 million, or 15% of Pinterest’s total revenue. By the third quarter of 20201, international revenue had reached $ 133 million. This is almost 22% of total turnover.
An investor who watches long-term growth potential should be very interested in these international MAU and ARPU figures. International growth, in a market still far from saturation, combined with a rapidly growing international ARPU, is a long-term growth equation.
Take a close look at these American numbers
Before setting aside concerns about the decline in US MAUs, let’s take a look at the US ARPU. That $ 5.08 for the last quarter was up 103% year-over-year. It’s not as impressive as the international growth rate, but it’s still triple-digit growth. To put it in perspective, in Q2 2020, Pinterest’s 96 million US MAUs generated $ 232 million in revenue. In the second quarter of 2021, 91 million UAMs in the United States totaled $ 480 million in revenue.
In other words, in the US and international markets, Pinterest continues to improve in monetizing its user base. This means that the slight drop in user engagement figures is far from catastrophic. This is another catalyst for long-term growth for PINS stocks.
Final result on the stock of PINS
Pinterest’s stock currently gets a B rating in Portfolio filing cabinet. The company faces challenges, including preventing its US user base from declining further. If nothing else, further erosion there would cause short term pain to the stock.
But the positives far outweigh the negatives in this case. It is a company that is growing internationally and in the monetization of users. It’s also a tech / social media company that has largely escaped the antitrust scrutiny so many others face.
At the time of publication, Louis Navellier had a long position in PINS. Louis Navellier did not have (directly or indirectly) any other position on the securities mentioned in this article. The InvestorPlace research staff member primarily responsible for this article did not hold (directly or indirectly) any positions in any of the securities mentioned in this article.
The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publication guidelines.
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