Pinterest – Ready, set, go!

Ready for recovery?

• Pinterest is changing its CEO with its founder moving aside to make room for new blood from Google that will undoubtedly start to shake things up which makes Pinterest an interesting proposition to look at once again.
• Founder and long-term CEO Ben Silbermann is moving aside to the relatively innocuous position of executive chairman to make way for Bill Ready who comes from Google.
• Bill Ready was head of commerce and payments and responsible for adding the next billion users at Google but he originally came from Venmo (payments) where he was CEO and PayPal where he was COO after PayPal acquired Venmo.
• This is a timely change as Pinterest has got itself into a rut following the pandemic and clearly needs a fresh pair of eyes and a change of direction to shake the malaise.
• To be fair to Mr Silbermann, he has done an excellent job in growing Pinterest’s user base to 430m MaUs but the monetisation has not followed and this is where someone from Google should be able to help.
• Google is exceptionally good at monetising the users and the traffic that it has, which combined with a background in payments and commerce, makes Bill Ready a logical fit.
• However, there is a lot to do as Pinterest has a great asset in its user base which to date has not been properly monetised.
• Furthermore, a significant percentage of the user base are women who have spending characteristics that are particularly well suited for the service that Pinterest provides and often come to the platform with intent which should be highly monetisable.
• Despite this, the average revenue per user per month is pitiful at $0.44 when one compares it to Google, Meta Platforms or even Twitter meaning that there is a lot of revenue being left on the table.
• This is what Mr Ready is clearly going to attempt to fix and the upside should he be successful will be substantial.
• The company has given back all of its pandemic gains and is trading on around 2022 3.5x EV / Sales which is not cheap, but it is getting towards the lower end of the range and the company is comfortably cash generative.
• I think that the recent user declines will soon stabilise as the company enjoyed a pick-up in users when all the shops were shut and it is these pandemic tourists who are now leaving the platform.
• Hence, the share price is not assuming that Mr Ready has much impact and that the company continues to chug along with the low ARPUs continuing for the foreseeable future.
• Consequently, Pinterest is one worth having a look at and if one concludes that Mr Ready will be able to improve monetisation, then there will be substantial upside.
• I suspect that there could still be some weakness to come given that the valuation is still not bargain-basement cheap and market conditions are awful, but the majority of the pain has already been felt.
• One for the watch list.