Pinterest becomes public. Here is what you need to know.

The new stock market lost some of its unicorn fairy dust after a disappointing start to
An upcoming initial public offering could bring back some of the magic – and it may not be that of Uber Technologies.

It's Pinterest, the operator of a popular bulletin board website. Its business is attractive and growing strongly, it is close to profitability and, most importantly, it seems willing to ask at the price of the sale. At the end of last week, on Wall Street, there was talk of strong demand for this week's IPO, which would raise $ 1.2 billion or more, and the price could be higher than the current range from $ 15 to $ 17 per share.

This equates to a price below $ 21 per share that Pinterest received during a round of Fidelity Investments financing in 2017. Midway through, Pinterest, which will appear under the PIN symbol, would be valued at around 10, $ 5 billion, based on fully diluted account of approximately 655 million shares.

At a time when unicorns – private companies worth more than $ 1 billion – feel compelled to set aggressive prices for their IPOs, Pinterest's restraint could pay off.

Lyft (ticker: LYFT) pushed too hard and set his IPO at $ 72 a share, above his price range. The stock has since fallen to $ 59, as investors focus on its heavy losses and await the IPO of Uber, its larger and more powerful rival.

Uber's announced target of $ 100 billion worth of market may prove unreasonable after Thursday's release of its IPO. He showed that central revenues have collapsed in recent quarters, suggesting that the global opportunity to be hoisted may not be as important as fans of Uber and Lyft think.

Uber's core sales reached $ 2.54 billion in the fourth quarter of 2018, almost the same amount as in the second quarter, while operating losses remained at $ 3 billion. last year, compared to $ 4.1 billion in 2017.

Pinterest could be considered expensive by traditional financial measures, and investors are likely to compare it to high-value Internet companies such as

(TWTR) and

(BREAK). Pinterest is posting a rapidly growing business volume of $ 756 million, up 60% from last year, and is expected to grow by about 45% to about $ 1.1 billion. dollars this year.

E = estimate

Sources: Atlantic actions; company reports

* Removes the net cash from the price; E = estimate

Sources: Bloomberg; Atlantic actions

By the end of 2018, Pinterest had more than 265 million users worldwide, including 82 million users in the United States, who compiled visual scoreboards with pinned images on topics such as renovation housing, wedding planning, fashion and cooking. Women make up two-thirds of Pinterest users, including 80% of American mothers aged 18 to 64 – an attractive population given the role women play in household financial decisions. Pinterest states in its flyer that half of the US millennials are users.

The company uses advertisers who buy so-called promotional pins, comparable to sponsored posts on Facebook, because users often consider making purchases. Pinterest is called the productivity tool for planning your dreams.

James Cordwell, an Atlantic equities analyst, began hedging Pinterest with an overweight and a price target of $ 23 per share, claiming that "the company's unique and highly attractive proposition, offering consumers the opportunity to view and gather visual recommendations, will enable continued growth. "He expects to" a significant increase in monetization, given the intention of increased purchase of the user base. And sees an annual compound growth of 32% in revenues from 2018 to 2022.

One of Pinterest's greatest opportunities and challenges lies outside the United States, where it generates only 8% of its revenue.

"Twitter derives nearly half of its revenue outside the United States," said Cordwell. Barron. "There is no structural reason why Pinterest can not be as successful as Twitter."

Unlike Lyft, Pinterest is close to profitability on an annual basis and operates in the dark in the fourth quarter. The company lost $ 75 million in 2018, compared to $ 911 million for Lyft. Cordwell expects non-GAAP profitability in 2019 excluding stock-based compensation. Like many tech companies, Pinterest is a generous issuer of employee-restricted subordinate shares, a payoff that information technology investors are often willing to ignore. Cordwell expects GAAP profitability in 2021.

Pinterest will likely be evaluated based on its revenue. Assuming an introductory price of $ 16, the company would be valued at eight times the 2019 projected sales for 2019 taking into account its $ 1.5 billion in cash. Snap is rated nine times, and Twitter and

(FB), around seven o'clock.

Shyam Patil, an analyst at Susquehanna Financial Group, wrote that Snap's valuation "could give Pinterest a say."

It would be bullish since Snap is more popular than Pinterest. He views Pinterest as a "better company" than Snap with a "much clearer and more visible growth story". While Pinterest is competing with Facebook, which uses its Instagram account to boost e-commerce, Facebook is a more formidable rival for Snap.

Among the moves against Pinterest, there is commitment. Unlike Facebook, Snap and Twitter, the company does not report daily active users. It reveals that 57% of its monthly active users visit the site every week. Analysts estimate that the ratio between daily and monthly users on Pinterest is between 20% and 25%, against about 40% for Twitter and about 65% for Facebook.

Cordwell agrees that this is a problem, but is offset by the "high purchase intent" of Pinterest users.

However, investors will have no power over the company as Pinterest will issue Class A shares in the transaction, while converting all outstanding shares held by less advanced investors, including the company's founders, Ben Silbermann and Evan Sharp, in Class B shares with 20 votes each.

The question for Pinterest is whether it can become an important destination for online advertisers in a market dominated by
of the
Google (GOOGL) and Facebook. Investors would like to see Pinterest become what Cordwell calls a "second level" platform such as Twitter or Snap, rather than a third tier platform such as


To get there, Cordwell thinks that Pinterest needs an annual business turnover of $ 3 billion, four times more than last year. He believes society has a good chance at this.

Among the many unicorns that will hit the market this year, you may want to add one in your investment book.

Write to Andrew Bary at [email protected]

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