What's up guys and welcome back to wall street millennial on this channel, we cover everything related to socks and investing. We all know that the pandemic minted many winners and losers within the business world, with work from home-related software and social media companies. Seeing exploding demand with most of the world fully reopened now work from home demand has moderated dramatically. This has created the so-called pandemic round trip where work from home stocks skyrocketed in some cases doubling or even tripling at their peaks, only to get back some, if not all, of their gains.

In hindsight, these stocks were clearly overvalued. Wall street got lazy and naively assumed that they can maintain their triple digit revenue growth rates for years to come, one of the most extreme examples that we've seen of this is a social media platform pinterest at its peak, the stock more than tripled to 85 dollars Per share creating tens of billions of dollars worth of paper gains, unfortunately, for shareholders. It has since given up more than 100 of this upside the current price of 22 dollars, a share is 10 below pre-covered levels and even below their 2019 ipo price. How can we make sense of such a rapid reversal of fortunes? Pinterest saw their number of users skyrocket during the early days of the pandemic, as people were stuck at home and had nothing better to do than browse through images.

Their number of monthly active users increased to almost 500 million at the peak of the stay-at-home bubble. In the first quarter of 2021, clearly, this rapid rate of growth is unsustainable and eventually they'll saturate it. But what very few people expected was that the platform would start rapidly deteriorating since the peak. They have lost users.

Every single quarter in today, 47 million, have left to put this into perspective. Their user-based shrinkage in the last three months is greater than the entire population of california. In a desperate attempt to save the sinking ship, ceo ben silverman announced a plan to massively increase their operating budget to hire new people and try to find ways to increase user engagement. This means they'll likely burn cash in 2022.

This confluence of factors has caused the stock price to freefall, losing 70 of its value over the past year, and almost straight line down today, we'll look at what pinterest is why their user base is deteriorating and whether the company has any realistic chance to save itself Before getting into the video, we want to remind everyone that april is the national testicular cancer awareness month. A lot of people don't know this, but testicular cancer is the leading form of cancer for men between the ages of 15 and 35.. In fact, one man every hour of every day is diagnosed with this disease. That's why today's sponsor manscaped has partnered with the testicular cancer society to help you take care down there as a leading global brand for men's hygiene and grooming products.

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So get yourself. The lawnmower 4.0 by manscaped and check out manscape.com tcs to learn more about how you can perform simple, routine self checks at home to prevent testicular cancer. As always, you can use my promo code wall street for 20 off plus free shipping at manscape.com, and now back to the video pinterest was founded all the way back in 2009 by a former google employee named ben silberman, he had long maintained a personal photo collection And wanted to create an online platform to share it with the world, so he quit his job and created. Pinterest pinterest allows you to upload a collection of photos called pin boards.

These can range from all types of things like fitness, cooking recipes and just about anything else, you can think of. Pinterest was the first mover in this market as the only platform solely dedicated to sharing collections of images. Pinterest audience goes very heavily towards females who make up almost 80 of their user base. There are a few theories as to why this is the case, including the perceived feminine nature of the website's design, or possibly, women just happened to use the platform first, creating a self-fulfilling network effect, but regardless of why people started using it, they achieved massive success with Their monthly active users surpassing 100 million by 2016.

in 2019, they ipoded on the new york stock exchange to great fanfare as the hottest new social media platform. Investors who missed out on facebook, wanted to buy shares of the next big thing, while the stock initially did well increasing by more than 20 on the first day of trading, it basically did nothing for the next couple years, despite their impressive user growth, their monetization was Lacking compared to their more established peers, as they ramped up spending on marketing as well as technology development, they burn cash rapidly. They primarily make money with sponsored pins brands pay to promote posts which advertise their products in the early days. They weren't very aggressive about placing these ads and only made a measly three dollars of annual revenue per monthly active user for comparison.

Facebook made almost 10 times that amount silberman was making a strategic decision to focus primarily on growing the user base. While this will lead to net losses in the short term in the long term, it can make the company far more valuable and if he wanted to get user growth, he was about to get it beyond his wildest dreams. When the pandemic hit in march of 2020, the world was turned upside down. Social distancing rules around the world prevented people from partaking in outdoor activities.

Billions of people found themselves stuck at home with nothing to do and what better way to expend your hours than serving images on pinterest, almost immediately after lockdowns were initiated. Pinterest saw their user numbers skyrocket. One year after lockdown began, more than 100 million new people were logging into the platform on a monthly basis. Pinterest took more than its fair share of pandemic growth and its share price more than tripled at the peak it's almost as if pinterest was specifically made for a pandemic.

If you log on to the platform, you can see that the content is heavily skewed towards recipes. You can easily browse for hours looking at exotic and gourmet foods that people cook at home with restaurants, closed people spend their newfound free time trying out recipes. Naturally, this was a huge boost. Additionally, unprecedented fiscal stimulus from the federal government left consumers flushed with cash, increasing their propensity to click on and buy products from sponsored pins, their revenue increased by roughly 50 in both 2020 and 2021..

In the later year, they reported their first ever annual gap. Net profit impressed by the growth wall street bid up pinterest stock to a 60 billion valuation, making silverman a multi-billionaire pinterest stock peaked in february 2021.. It's important to understand the context at the time. This was the height of the kathy wood bubble where all pandemic beneficiary stocks were pushed up to obscene valuations.

In hindsight, it should have been expected that they should come back down to earth, but nobody could have predicted the speed and severity of pinterest deterioration, starting in the second quarter of 2021. The platform saw sequential declines in monthly, active users in every single quarter. During the lockdown period. A tremendous amount of pent-up demand built up.

People were tired of staying at home and browsing on pinterest all day. They wanted to go outside meet with friends in person and do all the things they couldn't do previously. Today. Pinterest market cap is about the same as it was pre-covered, but is that fair today and in february of 2020, the company was valued at 15 billion dollars.

Even despite the recent declines, their monthly active users have increased by almost 100 million from pre-covered levels. Their revenue has more than doubled and they went from a net loss to a net profit. This means the market cap per monthly. Active user has declined from 45 dollars to 35.

Their price to sales ratio has declined from 13 to 6 and while their price to earnings ratio of almost 50 is high, at least it's now positive. You could have made the argument that the stock was overvalued. Pre-Covered, and certainly during coved, but at the very least, it's less overvalued now. The biggest concern for investors is how much further their monthly active users can decline.

Ever since pinterest first became successful in 2012, critics have been calling it a fad predicting. It will eventually fizzle out, but 10 years later, it's going strong and has more users than twitter and silverman is not giving up in the most recent earnings call. He said that the company will ramp up its operating expenses by 40 to hire new people across their research and development, as well as sales and marketing divisions and they're, not just standing still. At the end of 2021, they launched the pinterest creator fund, where you can get paid up to one thousand dollars for creating a pin if it gets enough engagement and meets some other requirements, while this will hurt the company's profitability in the short term.

The idea is that will encourage creators to make higher quality content. Remember that pinterest currently makes roughly one-tenth of the average revenue per user compared to facebook. Part of this is because facebook users spend more time per day on facebook compared to pinterest. But parva is also because pinterest ad platform is far less sophisticated than zuckerberg's their plan to spend hundreds of millions of dollars to close this monetization gap, which could theoretically provide a massive boost to revenue, even if their user numbers continue to stagnate and on the user-based Side, things may not be quite as dire as they seem while they haven't announced their first quarter results.

Yet they say that their global monthly active users as of february 1, 2022 with 437 million, which is about one percent higher than the prior quarter. While this isn't an incredibly impressive number, it looks like they've at least stopped the bleeding. While pinterest took its shareholders for a wild ride during the pandemic, it looks like it will continue to be an important platform and dominate the niche of online image sharing for the foreseeable future. Alright guys that wraps it up for this video, what do you think about? Pinterest, is it just the fat or is it here to stay? Let us know in the comments section below as always.

Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.