Pinterest (NYSE:PINS) stock was at one point surging nearly 572% off its low, Shares have slipped back recently falling from around $90 per share, to around $68 today.
With investors shifting focus to a Covid-19 recovery, stocks that “crushed it” during the pandemic have started to pull back, but recovery optimism isn’t the only factor behind the recent slide in “pandemic play” tech stocks.
Rising interest rates have played a role as well. Trying to factor these and other elements together, it is still hard to tell where are shares headed next.
On one hand, Pinterest is still growing, even after the recovery. With sales set to soar around 48.2% this year, and nearly 35% next year, there may be enough growth to support the stock at or above today’s price levels.
On the other hand, market direction, not its fundamentals, may be what drives price action from here. Shares could continue to head lower if investors continue to hit the brakes on their overenthusiastic sentiment for tech stocks.
So, what’s the best move? With the potential for another pullback, those wanting to enter a long-term position should sit tight for now.
PINS Stock and Post-Recovery Growth
Right now, Pinterest appears to be in an “on the fence” situation. That is to say, you can make a case PINS has enough at play to fuel a rebound, but you can make the opposite case as well. Namely, if tech stocks have another sell-off after their recent partial rebound, tech plays like this could continue tumbling down to lower price levels.
First, let’s look at the bull case: PINS stock continues to soar as the company continues to thrive post-pandemic. This bull case is built on the company’s heavy exposure to the e-commerce megatrend.
As InvestorPlace’s Thomas Logue put it, Pinterest is a “visual search engine for e-commerce.” This makes it an appealing platform for both advertisers and users. Advertisers like it because the lion’s share of the user base going on Pinterest for “purchase inspiration.”
Plus, users keep coming back for a pleasant experience. Besides being a goldmine for crafting, culinary and decorating ideas, with little of the politics that bombards user feeds on Facebook (NASDAQ:FB) and Twitter (NASDAQ:TWTR), Pinterest is free from the negativity that’s now infamous with social media.
Put it all together, and this stock continues to look like a long-term winner. The e-commerce megatrend isn’t going away, which points to continued strong demand from advertisers.
Social distancing and lockdowns may have helped accelerate user growth in 2020—Monthly Active Users, or MAUs, went up around 43% last year—but these new users aren’t going away as things open back up. In short, there’s plenty that points to the continued rise of Pinterest over the long run.
Yet, what about the short-term? The company’s strong fundamentals may not be enough to counter a possible continued change in the stock market’s view on tech stocks.
Market Sentiment May Be Key
The growth story remains in motion for PINS stock. Its level of growth may be starting to decelerate, but a deceleration from 48% to 35% is hardly anything to sneeze at. However, this may not determine where the stock is headed in the near-term.
The overall direction of tech stocks is going to be the driver. Many factors (rising interest rates, the recovery) had investors re-assessing valuations for this richly-priced sector during last month’s sell-off.
As seen from their partial rebound, investors are still somewhat confident pandemic play valuations are not out of hand. However, it’s too early yet to tell if this is the start of another stunning upward move or merely a temporary bounce-back.
While bears screaming “brace for impact” may be needlessly pessimistic, even if the bull market continues through 2021, we may see smaller, choppier gains from here. And, that’s assuming markets will behave as they have historically. Given the uniqueness of last year’s stock market recovery (driven largely by government stimulus and Federal Reserve policy), it’s even less clear whether prices are moving up or down from here.
Bottom Line: Wait and See With Pinterest Stock
Pinterest’s fundamentals remain rock solid. Its growth may be starting to decelerate, but this could become a massive, highly-profitable social media platform over the long haul.
That being said, when it comes to short-term price action, shares will move in line with other tech stocks. This may mean lower prices if investors continue to cool on their enthusiasm for the sector.
With market sentiment in the driver’s seat, it may best to wait for another big correction, pullback or sell-off, before buying PINS stock.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.