A superior social media stock down big
Jamie Louko (Pinterest): Investors have smashed the dislike button on social media stocks as many are struggling to retain users and have seen advertising revenue fall off a cliff. Take Meta Platforms (META -0.97%), for example. In Q3, revenue fell 4% year over year and monthly active users increased by just 2% over the same period.
Pinterest, however, is bucking this trend. It has struggled over the past year, but the company looks like it’s coming out of the other side of the tunnel. The social media platform saw sequential user growth of 12 million in Q3 to 445 million monthly active users.
The company also grew monetization faster than its social media rivals in Q3. Snap (SNAP -0.83%)saw global average revenue per user (ARPU) drop 11% compared to the year-ago quarter in Q3 to $3.11. Comparatively, Pinterest increased its global ARPU by 11% over the same period to $1.56. Snap’s ARPU excluding North America and Europe also fell 9%, but Pinterest’s ARPU in the same region skyrocketed 38% to $0.11.
How can Pinterest continue to attract ad spending while rivals are struggling? CEO Bill Ready said it best on the company’s Q3 earnings call:
Pinterest is a unique place for advertisers because our users seek inspiration and discovery with intent and purpose. This has a number of implications. To begin with, we have on-platform, first-party signals like searches, saves, and board curation that translate into highly valuable and monetizable customer insights for advertisers.
This isn’t coming at the expense of profits, however. The company has generated $61 million in net income and $591 million in free cash flow over the past 12 months.
Despite this outperformance compared to peers, Pinterest is trading at a measly 26 times free cash flow -- far below Snap’s valuation of 120.5 times free cash flow. With Pinterest’s fall alongside the Nasdaq, it might be the right time to buy a few shares of this superior social media stock.
