San Francisco-headquartered Pinterest (NYSE:PINS) is sometimes known as a visual discovery platform. Soon after the onset of the Covid-19 pandemic, PINS stock rallied because people were spending more time indoors, on social media.
That was a while ago, though, and the Covid-19 pandemic-related catalysts are fading away in 2022. Even the emergence of the omicron variant hasn’t, for the most part, prevented people from venturing outside.
As a result, Pinterest is struggling to get its mojo back. Wall Street doesn’t seem particularly enamored with PINS stock, as the share price has declined persistently for nearly a full year.
Some folks might want to go on a bottom-fishing expedition with Pinterest, but they should be cautious. They’ll likely have second thoughts once they’ve seen Pinterest’s discouraging bottom-line statistics and the platform’s lack of active user growth.
PINS Stock at a Glance
The old saying that the trend is your friend, can be reversed. When a stock just keeps falling month after month, the trend is your enemy if you’re invested in that stock.
When it comes to PINS stock, it surely looks like the best days are in the rear-view mirror. As you may recall, the stock rocketed from roughly $12 in March 2020 to a resistance level of around $85 in February and April 2021.
Sometimes, whether the investors like it or not, a resistance level never gets broken. Almost a full year after topping out, the Pinterest share price hasn’t revisited $85 again.
Wall Street is sending a clear and unmistakable message: PINS stock is a toxic asset and bottom-fishers should just stay away. By the middle of March 2022, the share price had sunk below the crucial $25 level.
The bottom line here is that you shouldn’t try to be a hero. It’s your job as an investor to grow your wealth, not to rescue a declining social-media stock.
There’s No Value Here
Some traders might assume that PINS stock must be a terrific value, since it’s cheaper than it was a year ago.
However, making assumptions can be bad for your financial health. Let’s at least look at the facts before jumping into the trade.
Pinterest has a trailing 12-month price-to-earnings ratio of 52x. This isn’t what value investors would typically consider to be a major bargain.
Also, income seekers probably won’t have much interest in PINS stock, as the company doesn’t pay a dividend. So, with the share price falling and no dividends to provide a cushion, it has been a hard landing for the investors.
Now, all of this might be forgivable if Pinterest were able to demonstrate growth in the areas that matter the most. In particular, the shareholders should want to see active user growth as well as bottom-line expansion.
Too Much Spending
Unfortunately, Pinterest is failing in those areas. As it turns out, the company’s global monthly active user count decreased 6% year-over-year during 2021’s fourth quarter.
Again, this could be construed as a sign that the Covid-19-related catalysts that benefited Pinterest, simply aren’t there anymore.
Besides, this isn’t a one-time fluke. Distressingly, Pinterest’s monthly active user count has declined for three consecutive quarters. It’s also problematic that Pinterest’s U.S. monthly active users declined 12% year-over-year in Q4 2021. If this trend continues, Pinterest and its stakeholders could be in real trouble.
Furthermore, Pinterest’s net income shrank from $207.8 million in 2020’s fourth quarter to $174.7 million in Q4 2021. This appears, in large part, to be due to the company’s spending habits. From research and development to sales and marketing as well as general and administrative expenses, Pinterest spent more in 2021’s fourth quarter than it did in the year-earlier quarter.
As the old saying goes, you can’t spend your way to prosperity — and Pinterest’s management should take this principle into consideration.
The Takeaway
Pinterest’s net income is shrinking, and the company’s across-the-board spending isn’t helping the situation at all.
Moreover, the platform’s monthly active user count, especially in the U.S., is declining.
These are major red flags that should deter any prospective PINS stock investors. Worst of all, the stock is on a persistent downward trajectory — and any self-appointed hero might just end up with a big zero.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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