Pinning a Narrow Moat on the Pinterest Board
Profitability is in sight as we foresee Pinterest taking a pinch out of the global digital ad market.
In our view, Pinterest (PINS), an online product and idea discovery company that generates revenue by selling digital ads, has an intrinsic value of $15 billion, or $22 per share on a fully diluted basis. The company is progressing toward an initial public offering by mid-April. After its last round of funding in June 2017, the company’s implied valuation was $12.3 billion, according to PitchBook. However, in its latest S-1 filing on April 8, Pinterest indicated an IPO price range of $15-$17; the $16 per share midpoint represents nearly an $11 billion market capitalization, below its last post-funding valuation. Assuming the IPO pricing remains in that range, we view Pinterest as an attractive investment opportunity.
We rate Pinterest as having a narrow economic moat and stable moat trend based on the network effect and intangible asset (data) moat sources, which we think can drive the company to profitability and excess returns on invested capital in the future. With more than 250 million average monthly users who access Pinterest with the intention of not only discovering ideas or products but also purchasing them immediately or in the future, we think the company can attract more online ad dollars. In our view, Pinterest can attract various types of ad campaigns through the marketing funnel--from broad exposure or awareness to targeting and actual conversion. We think opportunities exist for the company to gradually increase its share of the U.S. digital advertising market, after which, as its international users (mainly in Europe) increase, it will attract more ad dollars for that audience.
Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.