Why Pinterest (PINS) Stock Could Be The Next Facebook?

RiverPark Advisors an independently-owned investment firm, recently published its first-quarter RiverPark Long/Short Opportunity Fund commentary. During the first quarter of 2020, the RiverPark Long/Short Opportunity Fund returned 9.48% (institutional shares), compared to the total return of -19.60% by the S&P 500 Index. You should check out RiverPark’s top 5 stock picks which helped them beat the market by nearly 30 percentage points. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, RiverPark Advisors highlighted a few stocks and Pinterest Inc. (NYSE:PINS) is one of them. Pinterest is a social networking company. Year-to-date, PINS stock gained 4.2% and on May 7th it had a closing price of $18.70. Its market cap is of $11.4 billion. Here is what RiverPark Advisors said:

“Pinterest is known for its pinterest.com website where people post pictures or “Pins” and view them to share ideas on a wide range of topics. Pinterest has more than 335 million monthly active users (MAU), 47% of total internet users in the United States, 2/3 of whom are female. The company reaches eight out of ten moms and half of all U.S. millennials ages 18-34. These users are coming to Pinterest to get inspiration for their home, their style, or upcoming travel, which often means they are actively looking for products and services to buy.

The company is still in the early stages of building an advertising product suite that fully taps its extremely attractive customer demographics. PINS’ ARPU was $3.73 last year, significantly less than SNAP’s $8, Twitter’s $25 and Facebook’s $50. PINS’ ARPU increased 15% for 4Q19 and we expect it to continue to close the gap. MAU are also growing, up 26% for the fourth quarter to 335 million, driving 46% revenue growth. Increasing users and ARPU should drive 30% revenue growth for years to come, as well as expand gross margins from 69% last year to 75%- 80% and improve operating margins from currently negative to more than 25%.”

As you can see RiverPark believes PINS has the potential to be the next Facebook Inc (NASDAQ:FB), Twitter Inc. (NYSE:TWTR), and Snap Inc (NYSE:SNAP) by increased user engagement. In Q4 2019, the number of bullish hedge fund positions on PINS stock increased by about 12% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with PINS’s huge upside potential.

Disclosure: None. This article is originally published at Insider Monkey.