Madhu Chaudhary breaks down Pinterest's investment case: an ad-driven platform focused on shopping, not social. Revenue grew from $473M in 2017 to $1.14B in 2019. CEO Ben Silberman and co-founder Evan Sharp are building video, in-app shopping, and Shopify partnerships to justify a 27x price-to-sales multiple.
Hello everyone and welcome to Forced Focus from LeftBrain Investment Research. I'm Madhu Chaudhary, investment analyst here at LeftBrain. I'm here to give you my recent insights on Pinterest and conclude my report with thoughts on whether the stock makes for a good investment. Here at LeftBrain Investment Research, we evaluate securities through the LeftBrain lens, a process beginning with market intelligence from our proprietary technology system Jarvis, followed by an analyst deep dive into criteria uncovering critical insights that drive a successful business. So let's dive in by reviewing Pinterest's platform and business model. Pinterest is one of the most popular social media sites in the world, providing its around 442 million users the ability to share and discover products and inspirations on its platform. Users can use pins to post products they like on boards that often represent a theme. The company earns revenue by selling ad inventory to marketers. Let's examine how the company's value proposition differs from competitors. Facebook and Instagram and even Snapchat are about connecting people. While some of the shared content is about products, a lot of content is about personal interactions, experiences, and observations. Twitter is about sharing thoughts. In a way, tweets on Twitter are similar to pins on Pinterest. However, the goal on Twitter is to often share a thought or an article and not a product. Pinterest, on the other hand, is about sharing products and product ideas you like with others. This focus attracts shoppers or spenders to the platform that makes Pinterest highly attractive for marketers due to better conversion and ROIs. In other words, it has a clear-cut path to higher monetization levels over the next few years. Now that we understand the company's business model, let's review the company's growth drivers in the future. The company is adding more features to its platform, such as the ability to post video content, direct shop buttons that allow a purchase to be made within the Pinterest app. Pinterest is also starting to strike strategic deals with companies and retailers to make it easier for them to list their inventory on the Pinterest platform. A recent example is the company's deal with Shopify that allows Shopify's customers to seamlessly list their products on Pinterest's platform. Finally, when we look at the global footprint of Pinterest, we see that it has an even larger runway when it comes to monetization potential internationally as the platform develops in some of its newer markets. Let's have a look at the company's management. The company's co-founder and CEO is Ben Silberman. He has been at the helm since its founding. Prior to Pinterest, he co-founded an app development company called Cold Brew Labs and also worked at Google for 3 years. The other co-founder still holding leadership position in the company is Evan Sharp. He's the chief design and creative officer of Pinterest. He's credited with developing the grid layout design which Pinterest has used till date. Prior to joining Pinterest, he spent 1 year at Facebook as a product designer. Now that we have a clear picture of the company's market positioning and management, let's use the snapshot to view how that translates into financials. Revenue has grown from $473 million in 2017 to $1.14 billion in 2019. The last critical piece of this puzzle is a stock's valuation. The company stock trades at a price-to-sales multiple of nearly 27 times which is at a premium to its average since IPO, but in our mind, this premium is justified due to a solid business model as well as a large growth opportunity ahead. So what does all this mean for Pinterest stock? Pinterest's platform is highly targeted and monetizable given its focus on being the catalog of ideas. We believe the company has a large growth opportunity ahead and the right team to execute on the growth strategy. With the long-term in mind, LBIR feels the company's well-positioned and we're giving Pinterest a green light rating. For more investment insights with a view through the left brain lens, visit us at leftbrainii.com to like, share, and subscribe. Be a part of a growing community of left brainers who experience the informed decisions and independent thought that powers our search for profitable investment opportunities. This is Madhu Chaudhary for First Focus from Left Brain Investment Research. Thanks for watching, and I'll see you soon with more investment insights.
With millions of terabytes in the cloud, cybersecurity is critical for businesses, and the top suppliers of that security are also in demand by savvy investors. That's why you can't miss January's Fortune Makers event, Cybersecurity: 3 That Lead the Trend. I'm Nolan Langford, Chief Investment Officer of Left Brain Investment Research. Join us for our live Zoom event Thursday, January 7th at 5 PM Eastern, where we report on 3 stocks that are setting the trend in cybersecurity. You'll get stock reports, our analyst head-to-head segment, and a live Q&A with the Left Brain Analysts. To register, just click the link below. The event is free to Left Brain subscribers and an affordable $25 for non-subscribers. This live Zoom event's only a few days away, so register now for Cybersecurity: Three That Lead the Trend, Thursday, January 7th at 5 PM Eastern. We'll see you there.
