EUR 850.00 For Business Accounts Only

Morningstar | We Pin a Narrow Moat Rating and $22 FVE Onto Pinterest

Pinterest, an online product and idea discovery company, is focused on carving out a piece of the global digital advertising space. While we don't expect Pinterest to displace online advertising behemoths Google and Facebook or up-and-coming Amazon, we do expect it to attract a small pinch of digital ad spending, which we estimate is an addressable market of nearly $500 billion. We rate Pinterest as having a narrow economic moat and stable moat trend based on the network effect and intangible asset (data) moat sources, which we think can drive the company to profitability and excess returns on invested capital in the future. With more than 250 million average monthly users who access Pinterest with the intention of not only discovering ideas or products but also purchasing them immediately or in the future, we think the firm can attract more online ad dollars. In our view, Pinterest can attract various types of ad campaigns through the marketing funnel--from broad exposure or awareness to targeting and actual conversion. We think opportunities exist for the firm to gradually increase its share of the U.S. digital advertising market, as well as grow internationally (mainly in Europe) in terms of both users and ad dollars collected from this audience. As a platform for content sharing, a big risk for Pinterest is that the firm is susceptible to blame for spreading misinformation via pins. Additionally, by having an international audience, Pinterest is subject to Europe's General Data Protection Regulation. Still, there has been little public outcry based on how Pinterest uses pinners' data and whom this may be shared with.