Founded in 2008 and based in San Francisco, California, Pinterest is an image-based social media network and mobile application. Pinterest’s growth rate has been outstanding, and the site is now available worldwide in 27 languages serving 290 million members.
The company’s growth rate has also attracted businesses that have expanded their presence on the website with Pinterest’s new pages for business. The new Pinterest offering for businesses allows them to open a “virtual storefront” that consist of pages created with the purpose of promoting their companies online.
Outlook for Pinterest Stock
In a letter to shareholders, Pinterest reported first-quarter revenue of $201.9 million, or an annual increase of 54%. However, its non-Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) showed a loss of -$0.32 per share.
The analysts’ consensus expected revenue of $200.7 million and a loss of only -$0.11 per share, so the market’s disappointment hit the share price hard. The company included its 2019 full-year guidance in the letter, which also was lower than the analyst’s consensus.
The company estimated total revenue for 2019 of $1.055 billion to $1.08 billion, or an increase of 40% to 43% year on year. Its estimated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was a loss of -$45 million to -$70 million.
Analysts’ estimates for the full year were for a similar revenue result of $1.07 billion but a smaller loss of -$28.5 million.
While the $0.32 quarterly loss may not look good, revenue numbers came closer to analyst estimates. The selloff in the company’s stock after the earnings release was more due to the full-year guidance numbers, which showed a yearly loss almost twice as large as analysts had expected.
Pinterest Chief Financial Officer (CFO) Todd Morgenfeld said the company was in the process of opening up new international markets. In addition, he noted that Pinterest was going to diversify the company’s advertiser base by investing in self-service tools, which would improve yields both abroad and domestically since advertising revenue remains the main source of Pinterest’s profits.
When you buy stocks for investment, new companies like Pinterest may seem highly speculative if you just go by their earnings history, especially if they have only recently gone public.
A certain period of expansion and investment generally takes place after a company receives large scale financing from an IPO. That was the case when Pinterest got its last round of funding in 2017, when it sold $1.5 billion in stock to 37 companies that included Goldman Sachs and Rakuten.
Pros of Pinterest Stock
- Steadily growing member base
- Increasing revenues
- Growing international presence
- More business offerings
- Expanded advertising markets
Cons of Pinterest Stock
- Negative earnings
- Large stock float
- High stock price after IPO
- Over 150 million additional shares outstanding due to options and restricted stock units
How to Buy Pinterest Stock
Buying Pinterest stock is as easy as buying any other NYSE listed stock. Since the company has no upcoming IPO, the only thing you need in order to buy Pinterest stock is an account with a stockbroker and the funds to buy the stock with.
Of course, you will need to pick a broker if you don’t already have one, so we’ll make that our first step. Remember, how you buy Pinterest stock is just as important as where you trade, so make sure you pick the right broker.
Step #1: Pick a Broker
Your first step to buying Pinterest stock is finding an online brokerage that meets your needs. Before you pick a broker, decide what type of broker would be best for you.
If you have a lot of experience and don’t need any bells and whistles on your account, you could probably go with a discount broker or a no commission brokerage like Robinhood or Webull.
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Step #2: Practice Trading
If you know that you want to buy Pinterest stock for investment and nothing more, then all you need to know is the price you’re willing to pay for the stock and how much of it you want to buy at that price.
On the other hand, if you want to practice trading the stock, then you should consider trading in a virtual account before you start trading in a funded account.
You can also use a demo account to watch the stock if you expect to get a better price than the current market and to test out a new trading strategy.
Most online brokers offer a demo account that lets you trade the market with virtual money. Trading in a demo account is somewhat like training for the big game, you practice until you feel confident in your system, and then it makes sense to start trading in a funded account.
Pinterest stock has been extremely volatile since its IPO and first quarter earnings release, which makes the stock an interesting vehicle for short term trading strategies. Regardless of whether you buy Pinterest or any other stock, using a practice account before you begin live trading can generally benefit you.
Step #3: Fund your Account
After you have traded in a demo account with virtual money and have built up enough confidence in your trading strategy, you can then fund an account with the broker of your choice.
You can select a different broker than the one you opened your virtual account with, but since you have probably become familiar with their platform, you might be better off just opening your live account with the same broker.
Step #4: Buy Pinterest Stock
Ideally, you will have learned enough about Pinterest stock by trading in the virtual account and already have an idea of the price level you want to buy it at.
If you plan on buying Pinterest stock as an investment, you might want to place a Good ‘til canceled order at the price level you’ve determined to be optimal and just leave the order in the market until it’s filled. Once filled, you could protect your profits if the market starts to rise by placing trailing stop-loss orders.
Is Pinterest Stock for You?
Pinterest stock may not look like much after its recent earnings report, but neither did Amazon shortly after its IPO. Newly listed stocks tend to surprise the crowd both positively and negatively.
Furthermore, some other IPOs — like the recent Lyft offering — have not performed as well as the public and analysts expected, although Lyft is involved in a completely different business.
If you plan on investing for the long-term, then Pinterest stock might be for you. On the other hand, if you plan on trading the stock more actively, then you’ll probably find plenty of opportunities using short term trading strategies.
Want to learn more? Learn how you can trade stocks for free, use the best online brokerage and how to sell stocks.
About Jay and Julie Hawk
Jay and Julie Hawk are a married financial writing and authorship team who co-founded TheFXperts, a notable financial writing services provider. The Hawks each worked professionally in the financial markets and have more than 40 years of trading experience among them. Together, they write books, trade forex online for their own account and others, mentor traders, and have worked actively as professional freelance writers specializing in financial topics for over 15 years.