In this article, we will be evaluating two social media stocks, Pinterest and Snap, to determine which one is a better investment. Pinterest is a visual discovery engine that allows users to find inspiration for various topics, while Snap is the parent company of the messaging app Snapchat.
Shares of Pinterest have seen a 15% increase year-to-date, but only a 6% gain over the past year. In comparison, Snap shares have gained 5% year-to-date but remain down 19% over the last year. The significant difference in their year-to-date gains is reflected in their valuations, with Pinterest trading at a higher price-to-sales (P/S) ratio than Snap.
Pinterest is currently trading at a P/S ratio of 6.5, which is on par with Meta Platforms, the parent company of Facebook. Snap, on the other hand, is trading at a P/S ratio of 3.4, indicating a steep discount relative to its industry and Pinterest. However, a closer look at Snap’s insider selling trends suggests a bearish view may be appropriate.
Pinterest has shown positive momentum in its fundamentals, with strong user growth and beating earnings-per-share and revenue estimates in recent quarters. The company’s CEO, Bill Ready, has been leading the company in the right direction. However, Pinterest does not currently deserve a valuation equal to Meta’s, indicating a more reasonable entry point may be advisable for investors.
On the other hand, Snap has never been profitable on an annual basis and has struggled to meet revenue estimates in recent quarters. Despite impressive year-over-year growth in daily active users, the company has not been able to achieve profitability. Analysts have even suggested that Snap may not generate any earnings until 2027, signaling a lack of optimism for the company’s future.
Overall, while social media stocks have historically been popular among investors, the current market environment prioritizes profitability. Pinterest appears to be on the right track, but it does not yet warrant a valuation equal to Meta’s. Snap, on the other hand, faces significant challenges in achieving profitability. Therefore, while Pinterest may be the better choice among the two, a bearish stance is appropriate for both stocks.
Sources:
– TipRanks’ comparison tool
– No URLs provided
Disclaimer: The information provided in this article is based on the author’s analysis and the sources mentioned. The author does not own any stocks mentioned in this article.