Buylyst

Published on 05/16/22 | Saurav Sen | 3,744 Words

The BuyGist:

Pinterest touts itself as the “happy” social medium – differentiating its content and purpose from its entrenched competition. As of March 2022, they have around 430 million active users.
This investment thesis is for subscribers only. However, below you can see a preview of the thesis – what our subscribers get.
This thesis (and all our other theses) connects qualitative factors about the company’s business to specific effects on each important cash flow variable – from Revenue down to Operating Costs, and all the way to Free Cash Flow.
The thesis estimates “what we need to believe” to buy or hold the stock for a decent return, followed by a decision on whether to buy, hold, or sell.
That decision depends on the “soft” stuff that matters – competitive advantage, economic moat, management strategy etc. Ultimately, it’s a qualitative decision.
Subscribers have full access to the investment thesis and our decision.
If you haven’t joined The Buylyst for clarity in investing, we encourage you to check out our Reasonable Pricing Plans here.

Table of Contents & Ground Rules

The point of this investment thesis is to have clarity on whether to invest in Pinterest or not and, more importantly, break down exactly why. Too many people “invest” by just punting based on spurious factors such as recent price movements, superficial valuation multiples, or hearsay from talking heads in media. Ultimately, it’s about decomposing the stock price into EXPECTATIONS that are baked in, and then answering the question “are these baked-in-expectations too optimistic or too pessimistic?”

Digging in – to the expectations that are baked into stock prices – takes time and effort. Most people don’t have the time or patience for this. But we love it!

Let us do the heavy lifting, so you don’t have to.

Here are the contents of the investment thesis:

Thesis Summary
Q1 2022 Earnings Report
What needs to happen?
Business Fundamentals
- Competitive Advantage & Moat
- Management Strategy
- Growth Drivers
- Competition
- Other Key Risk
- Financial Model Risk
Cash Flow: Moving Parts
Pinterest Revenue Growth Matrix
Sanity Check: Monthly Active Users
Sanity Check: ARPU Potential
Gross Margin Expectations
Fixed Costs Expectations
Cash Flow Summary
Cash Flow Details
Our previous Pinterest Thesis

Ground Rules:

Our minimum return requirement is: 50% in less than 5 years.
Based on this return requirement, we ask ourselves, “What do we need to believe about the fundamentals of the business to achieve our return requirement (or more)?”
Then we answer the important question: "do we believe it?"

Before we dig in, here’s a free snippet from one of the sections below. We believe that if this scenario comes to pass (or if the market believes it will), there is significant upside in PINS. Do you believe this is possible? Probable?

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