Pinterest (PINS) is an American social media company headquartered in California. It operates a digital pinboard where people come to discover inspiring content across a variety of interests, such as home, office, cooking, and vacation ideas.
For Q4 2021, Pinterest reported a 20% year-over-year rise in revenue to $847 million. It posted EPS of $0.25 compared to $0.30 in the same quarter the previous year. The company achieved a milestone of more than $2 billion in annual revenue for full-year 2021. For Q1, Pinterest expects to report revenue growth in the high-teens percentage range.
With this in mind, we used TipRanks to take a look at the risk factors for Pinterest.
Risk Factors
According to the new TipRanks Risk Factors tool, Pinterest’s top risk category is Finance and Corporate, which contains 21 of the total 51 risks identified for the stock. Tech and Innovation and Legal and Regulatory are the next two major risk categories with 12 and 6 risks, respectively. Pinterest has recently added one new risk factor and revised several previously highlighted risks.
The newly added risk factor falls under the Production category and discusses the challenges of attracting users to the platform. Pinterest ended 2021 with 431 million monthly active users, down from 459 million at the end of 2020. The company informs investors that it relies on creators to provide useful and relevant content that attracts and keeps users on its platform. The problem is that it competes with other platforms for creators. As a result, Pinterest cautions that growing its user base may become difficult if it is unable to attract and retain good creators.
In a revised risk factor, Pinterest stresses the challenge of growing its business. It explains that several factors outside its control affect user growth, retention, and engagement on its platform. Pinterest cautions that if its users base decreases and engagement on its platform declines, advertisers could find its service less attractive, which could harm its business.
In another updated risk factor, Pinterest reminds investors of uncertainties in its acquisition strategy. While the company intends to continue to make acquisitions to add specialized talent, products, and technologies, such deals may not deliver the expected benefits. Additionally, it may need to sell more shares or borrow to fund the acquisitions. The problem is that such financing options could dilute the interest of existing shareholders or subject the company to credit-related restrictions. Further, Pinterest cautions that acquisitions may require significant time and divert management’s attention.
Pinterest’s stock has declined about 30% year-to-date.
Analysts’ Take
Following Pinterest’s Q4 report earlier this month, Piper Sandler analyst Thomas Champion reiterated a Buy rating on Pinterest stock but lowered the price target to $46 from $53. Champion’s reduced price target still suggests 80.04% upside potential. The analyst noted that while Pinterest reported solid revenue, the decline in its user base was a negative factor.
Consensus among analysts is a Moderate Buy based on 8 Buys and 17 Holds. The average Pinterest price target of $40.58 implies 58.83% upside potential to current levels.
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