Both Facebook (NASDAQ: FB) and Pinterest (NYSE: PINS) represent communication stocks at two ends of the social media industry. One company dominates more generalized social media. the opposite occupies a distinct segment in areas like food, crafts, and fashion.
Nonetheless, they both depend upon advertising for many of their revenue. Thus, given the effect of COVID-19, they face an equivalent challenge of increased engagement combined with dramatically less ad revenue. Consequently, both companies have declined to supply forward guidance.
Facebook and Pinterest should see a recovery in ad revenue as people and businesses resume activity. Hence, investors should look to the longer term when deciding which stock offers a far better buy immediately .
Facebook didn’t invent social media, but it’s enjoyed the foremost success within the industry. The company’s user base has grown to 2.6 billion monthly active users (MAUs). With about 7.8 billion people within the world, meaning that approximately one-third of the world’s population uses a Facebook-owned platform during a given month.
At some point, the company’s dominant user base could lead on to questions on where Facebook can find new growth. Consequently, Facebook has bought new apps over the years, like Instagram and WhatsApp, to still attract growth.
Investors don’t need to worry yet. For now, growth remains robust. Facebook boasts a market cap of over $605 billion and continues to extend its user base and revenue stream. within the most up-to-date quarter, revenue moved higher by 17%, and profit rose by 102%. Though the speed of increase will probably slow, analysts expect earnings to rise by quite 16.4% per annum over the subsequent five years. With this level of growth, the present price-to-earnings (P/E) ratio of roughly 28.9 could seem reasonable even without available forward guidance. The price-to-sales (P/S) currently stands at slightly below 8.3.
Facebook stock appears almost as robust. It lost quite one-third of its value within the stock sell-off of February and March. However, it’s since recovered most of its losses. At just over $213 per share, it trades within 5% of the all-time high.
Unlike Facebook, Pinterest is more of a distinct segment social media site. the corporate designed it’s the site for the sharing and discovery of ideas. Users share this information visually through pins. They both pin ideas on their boards and explore pins on the boards of others.
Like Facebook, Pinterest derives revenue through ads. during this site’s case, that comes through promoted pins. This strategy has succeeded in producing double-digit revenue growth.
Still, Pinterest exhibits both the advantages and therefore the downsides of its much smaller size. For one, the corporate derives most of its revenue from one site. At a market cap of roughly $11 billion, it also remains a small fraction of Facebook’s size.
Still, within the most up-to-date quarter, the corporate increased its revenue by 35% year over year. Its net loss also increased by 241% over an equivalent period to $141.2 million. However, with a P/S ratio of around 8.75, its sales multiple is merely slightly above that of Facebook.
Other statistics point to massive growth also. MAUs increased by 26% to 367 million. Despite falling earnings estimates thanks to COVID-19, analysts search for the corporate to show profitable in 2021. Consensus earnings for next year currently stand at $0.16 per share.
The Pinterest stock has recovered since falling as low because of the $10-per-share home in March. Today’s price of around $18.50 per share means it’s risen by quite 80% from the low. However, it still trades at a reduction of roughly 50% from the $36.23 per share high of last August.