Why Pinterest Could Be the Hidden Gem of the 2019 IPO Class – The Fool Motley


Although 2019 is still young, this year is exciting announcement for the first public offers. Until here, we have seen the beginnings of Lyft and Levi Strauss. Just last week Pinterest (NYSE: PINS) and Zoom public markets and investors are still waiting for entries from Uber, Slack and Postmates, all of whom have asked to be made public.

The Lyft shares have so far been a fiasco, down almost 20% from their IPO price, and the warning deposits in Uber's S-1 record are plentiful. Until now, Levi's has kept his gains from the first day, but his potential seems limited as a traditional clothing manufacturer.

Pinterest, which jumped 28% on the day of its opening, is a company that has long been neglected in social media and could be a big winner in the market. Keep reading to see why Pinterest could be a successful IPO.

A Pinterest board on the screen of an iPad.

A Pinterest board. Source of the image: Pinterest.

A unique company

Pinterest is competing for advertising with the usual lineup of social media companies and digital platforms, including Amazon, Google, Facebook (NASDAQ: FB), Instagram, Twitter, and Break as well as small specialized companies like AllRecipes and Houzz. However, the company is one of a kind, acting as a virtual billboard to inspire users looking to do tasks such as redecorating their home, preparing a new dish for dinner or planning a wedding or parties. vacation.

This feature gives the company a cushion against competition and a distinct value proposition for advertisers.

The power of discovery

If you know what you are looking for online, it is relatively easy to find what you want by using sites such as Google and Amazon. However, if you do not know exactly what you need, or if you want to be surprised by something new, these sites are rare. This concept, called discovery, is what Pinterest has specialized in.

Users, whom the company calls Pinners, come to the site to browse images looking for novelties, such as a dress for a big event or a new landscaping project. These types of searches are of great value to advertisers because Pinners often comes to the site for the purpose of buying something. However, discovery-based e-commerce is still in its infancy, as Instagram has recently started experimenting with the concept and Pinterest is still in the early stages of creating an ad product that exploits the element. discovery and alignment among advertisers.

As the digital advertising market grows and advertisers seek to exploit discovery and search for options outside of Facebook and Google, the Pinterest model should prove fertile ground. Pinterest has also recently adopted the influence marketing, which should also be a source of growth, much like it was the case for Instagram.

A positive place

Rival social networks such as Facebook, Twitter, Instagram and YouTube have faced a litany of problems. Critics have complained that these sites do not deal with issues such as mental health or hate speech, let alone the usual controversy about user privacy.

Pinterest, on the other hand, is a respite for many toxic influences that have sullied social media. The company describes its model as personal rather than social, and said that 91% of its users describe Pinterest as a positive environment. The site is deliciously free from the antagonism that characterizes other popular social media platforms.

If the reaction against Facebook continues, Pinterest seems well placed to capture users who are tired of the negativity and inconvenience of the largest social network in the world.

How it all adds up

In 2018, Pinterest's revenues increased by 60% to $ 756 million. The net loss improved from $ 130 million to $ 63 million the previous year. In its preliminary report of the first quarter, the company had 291 million monthly active users, up 22% over the previous year. Most of its user growth is now coming from international markets, with almost all of its revenues coming from the United States. In other words, the monetization of the international market represents both an opportunity and a challenge.

On the basis of conventional measurements, the Pinterest stock is expensive with a price-to-sales ratio of 17, but it is a company that currently has $ 1.4 billion of money from its IPO and that it can use for marketing and R & D. More importantly, it has a unique and attractive platform for advertisers in the growing market of digital advertising. If the company operates efficiently, this formula could make Pinterest an exceptional winner in this year's IPO range.

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