Pinterest, featured in today’s IBD 50 Stocks To Watch, is approaching a new buy point after staging a strong comeback from the coronavirus market crash. It’s also generated a lot of buzz lately.
The San Francisco-based company, which came public two years ago, offers an online platform that helps users discover ideas for projects and a wide range of interests. After an auspicious start, shares dropped more than 70% from an August 2019 high to their March 2020 lows.
But Pinterest proved resilient as Covid-19 lockdowns helped users rediscover the platform. The stock came back to surge nearly 800% from the March 2020 lows to a Feb. 16 record high. It’s been consolidating since as it shapes a new base. The stock, up 5% Tuesday afternoon, is on track for a fourth straight advance.
Pinterest reportedly held talks to acquire VSCO, a popular photography app, according to the New York Times. The 10-year-old startup’s app, which lets users edit and share images and videos, led to the “VSCO girls” popular teen trend in 2019. VSCO stands for Visual Supply Company.
Evercore ISI began covering Pinterest with an outperform rating and a 97 price target, citing its rapidly evolving platform.
Pinterest Leads Stocks To Watch
IBD Stock Checkup assigns Pinterest a 98 Composite Rating, which gives investors a quick way to gauge a stock’s key growth traits. That puts Pinterest at the top of the 66-stock internet content group, which includes Facebook (FB), Google parent Alphabet (GOOGL) and Twitter (TWTR).
A 76 Earnings Per Share Rating, part of the overall composite score, is below the 90 minimum desired of leading growth stocks. But that could change in the near future. Pinterest didn’t turn its first annual profit until 2019, when it earned a penny a share. EPS jumped to 42 cents last year. Analysts expect 85 cents this year and $1.23 in 2022.
On the technical front, a 95 Relative Strength Rating means the visual discovery engine is beating 95% of all other stocks. Its relative strength line, which compares a stock’s performance to the S&P 500, has turned up. A rise to new highs ahead of a breakout would be a bullish sign.
Pinterest has regained its 50-day moving average line (or 10-week on a weekly chart). It’s now building the right side of a seven-week consolidation with a 90 buy point, according to MarketSmith chart analysis. Shares are about 7% away from the entry.
MarketSmith pattern recognition calls the base is first stage, which suggests Pinterest stock has the potential for a big advance. Leading stocks to watch often make their biggest runs out of such early stage bases. More realistically, the base is second stage because the stock more than tripled after clearing resistance around 27 last July. That bear-market pattern might be considered a first-stage base.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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