Monetisation of International Markets Occuring Faster Than Expected; Getting Closer to Profitability

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/27999" target="_blank" data-smartkarma-citation="entities:27999:1">Pinterest Inc (PINS US)</a> will be the latest Silicon Valley social media company to go public this week. Pinterest has set an IPO price range of $15.00-17.00, which implies a valuation of $10.3-11.3bn.  </li>
<li><div class="content-highlight"><strong>Pinterest's IPO valuation looks conservative to us on a growth adjusted basis. Our base case valuation for Pinterest is at $12.6bn, which translates to a share price of $19.40 - a 21% upside from the mid-point of the IPO price range. </strong></div></li>
<li>We expect Pinterest’s top-line to grow at a robust 3-year CAGR of 38.9% to reach $2.0bn by 2021 (cf. $756m in 2018) driven by strong ARPU growth in the domestic market, despite domestic MAU growth slowing down to single digits.  </li>
<li>We expect Pinterest's domestic ARPU to grow at a 3-year CAGR of 30% over the forecast period, underpinned by favourable double-digit growth in the US digital advertising market, Pinterest’s relatively higher ROI for advertisers which could allow them to secure a higher share of the advertising budgets of existing advertisers, likely introduction of more effective advertising products and expansions into new advertising verticals and mid-market advertisers.</li>
<li>Only around 10% of Pinterest’s revenue comes from overseas, despite the fact nearly 70% of its users are outside of the US. This means that Pinterest is yet to monetise a significant portion of its overseas users. We believe this is a key upside for Pinterest in the medium to long term. </li>
</ul>



Pinterest Inc (PINS US) will be the latest Silicon Valley social media company to go public this week. Pinterest has set an IPO price range of $15.00-17.00, which implies a valuation of $10.3-11.3bn.  
Pinterest's IPO valuation looks conservative to us on a growth adjusted basis. Our base case valuation for Pinterest is at $12.6bn, which translates to a share price of $19.40 - a 21% upside from the mid-point of the IPO price range. 
We expect Pinterest’s top-line to grow at a robust 3-year CAGR of 38.9% to reach $2.0bn by 2021 (cf. $756m in 2018) driven by strong ARPU growth in the domestic market, despite domestic MAU growth slowing down to single digits.  
We expect Pinterest's domestic ARPU to grow at a 3-year CAGR of 30% over the forecast period, underpinned by favourable double-digit growth in the US digital advertising market, Pinterest’s relatively higher ROI for advertisers which could allow them to secure a higher share of the advertising budgets of existing advertisers, likely introduction of more effective advertising products and expansions into new advertising verticals and mid-market advertisers.
Only around 10% of Pinterest’s revenue comes from overseas, despite the fact nearly 70% of its users are outside of the US. This means that Pinterest is yet to monetise a significant portion of its overseas users. We believe this is a key upside for Pinterest in the medium to long term. 


Pinterest

Pinterest IPO: Time to “Pin” It