After providing outstanding returns for investors in 2020, Pinterest (NYSE:PINS) has disappointed its shareholders in 2021 so far. Indeed, the third quarter was particularly brutal for folks who held onto their PINS stock.
This might cause some people to dump their Pinterest shares or avoid investing in the company altogether. However, this might be a crucial mistake.
For one thing, you have to ask yourself whether there’s actually anything fundamentally wrong with the company. In other words, is the rout of PINS stock justified?
A deeper dive into the company’s finances will reveal that Pinterest is moving in the right direction. Moreover, Pinterest is proactively expanding overseas – and if the market is ignoring that, then it’s time to consider buying a few shares of the company’s stock.
A Closer Look at PINS Stock
Let’s rewind the clock for a moment. In a stunning rally, PINS stock catapulted from around $12 in March 2020 to a resistance level of around $85 in February and April of 2021.
After booking 600% returns, it’s normal and natural for a stock to cool off for a while. Remember, stocks don’t just keep going up forever, even those of companies that are doing well. The summer was particularly brutal, as PINS stock slumped to $57 in early August. Yesterday the share price closed at $49.62.
What’s needed when it comes to PINS stock is a dose of perspective. Its long-term trend is still positive – and besides, emotionally weak traders usually give up their shares when stocks fall. But there’s no need to become a victim of a ruthless market. PINS stock should return to its $85 resistance level sooner or later.
Just keep your eyes on the prize and if you already own the stock, doing nothing could be your best strategy, even if it’s psychologically difficult to do so.
Seeing the Positive Trends
So what caused Pinterest’s share price to decline? I alluded to the cooling-off period after the massive run-up, which is to be expected.
Some have also theorized that growth stocks have declined generally. September was especially harsh on stocks that could be labeled as high-momentum names.
None of those factors should be viewed as problematic for Pinterest in the long-term. On the contrary, the company’s fundamental data should encourage investors to consider taking a long position in the stock.
Pinterest is not slated to report its earnings again for another month. Still, its second-quarter results showed that the company is benefiting from multiple, positive trends.
For instance, Pinterest recorded quarterly revenues of $613 million, representing 125% year-over-year growth. Additionally, the company increased its global monthly active users by 9% year-over-year, to 454 million.
Geographic Expansion
Granted, Pinterest refused to provide guidance on its Q3 monthly active user total. That may have been a wise decision, though, as Pinterest said that it was uncertain about certain key drivers of engagement.
And frankly, there’s no need to focus on the negative when the company has positive developments in the works. For example, one thing that’s great about Pinterest’s platform is that, while it might feel local to its users, the website really has a global scope.
To reinforce this point, Pinterest announced the expansion of its shopping features to Australia, Canada, France and Germany. As a result, the users in those regions will be able to shop right from Pins, boards, searches and via Lens camera searches.
The company also announced the launch of Shopping List, giving Pinners a way to have their product Pins automatically saved in one place. The Shopping List feature will first be rolled out in the U.S. and U.K., followed by Australia, Canada, France and Germany.
The Bottom Line
You just never know where in the world you might see Pinterest and its robust features. Clearly, the company is proactively expanding overseas. At the same time, Pinterest is demonstrating powerful revenue growth.
All in all, the outlook is bright for Pinterest. Since the share price doesn’t reflect that, PINS stock is providing an opportunity that shouldn’t be missed.
On the date of publication, David Moadel 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.