There’s a bullish argument that Pinterest (NYSE:PINS) stock is a buy right now. You can see why some would argue that’s the case: Global revenue increased 52% in 2021. That’s a fairly compelling metric.
But at the same time, Pinterest is still highly reliant upon its U.S. customer base. But let’s give kudos to the company, because it does deserve them.
The Good
Pinterest recorded $2.578 billion in revenue throughout 2021. That represented a strong 52% increase over 2020 figures. On top of that, Pinterest also reported its first net gain on an annual basis with $316.43 million in the black. Just a year earlier the company posted a $128.32 million net loss.
There’s no denying that the company has made many positive strides. That said, there are some clear warning signs. One of the more salient of them is that the company witnessed a slowdown in Q4. It reported a 15.95% revenue drop-off between Q4 2020 and Q4 2021.
That won’t wow investors who were already worried about decreasing (MAU) monthly average user figures across the board.
MAUs
Monthly average user figures declined globally, in the U.S., and internationally. That’s all bad, but the worst news is that the U.S. MAU figures led the way. Monthly average user counts declined 12% throughout 2021 and 12% during the fourth quarter.
That’s especially bad considering that the U.S. accounted for 78.2% of all revenues in 2021. That bodes poorly for Pinterest and raises a question: Is Pinterest going to rely on external markets moving forward?
If we consider that U.S. users generated 84% of revenues in 2020 that looks to be the case. Further, international revenue increased 110% in 2021 and 61% in Q4. International revenue, though, remains a relatively small contributor to overall results.
Value of U.S. Base
The simple fact is that U.S. users are much more valuable than their international counterparts. The average international user-generated $1.59 in revenue in 2021 while the average U.S. user generated $21.98.
So investors have every right to be concerned when U.S. MAUs decline throughout the year and quarter on a consistent basis.
The fact remains that Pinterest is reliant upon U.S. users. The fewer of them there are, the worse. That might be reflected in the company’s guidance moving forward.
Guidance
When Pinterest released earnings Feb. 3 it gave guidance that “our current expectation is that Q1 revenue will grow in the high teens percentage range year over year.” It’s hard to see how that’s anything other than a negative given Q4 revenue growth of 20%. Investors simply don’t appreciate sequential decreases.
It looks like the lockdown gains that tripled PINS stock price have vanished. Those prices are back to their pre-pandemic levels. Pinterest will have a much harder time convincing investors of its attractiveness without people confined to their couches. And that’s a real problem.
When you combine that with MAU concerns and a heavy reliance on U.S. customers, PINS stock is clearly facing an uphill battle.
What to Do With PINS Stock
I don’t see any realistic reason to jump into PINS stock based on what we can see from a fundamental perspective. Pinterest has to find a way to make itself attractive to U.S. users once again. That is no small task given how high the pandemic bolstered it. For all the reasons I just outlined I think it makes sense to stay away.
The catalyst that’s out there is a speculative one: There’s a possibility that Pinterest becomes an increasingly attractive takeover prospect as it slides to fresh lows. But, again, that’s simply speculation.
Investors can’t do much with that other than speculate. I’d play the safe bet which is that PINS should continue to struggle based on its fundamentals. Other than its current potential as an acquisition target due to low price there is no catalyst to send it upward soon.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.