Pinterest IPO: The Morningstar View

Morningstar analysts think the social media company could be worth $22 per share, above the indicative IPO price range of between $15 and $17

Ali Mogharabi 10 April, 2019 | 10:13AM

Pinterest founder Evan Sharp

In our view, Pinterest, an online product and idea discovery company that generates revenue by selling digital ads, has an intrinsic value of $15 billion, or $22 per share on a fully diluted basis. The firm is progressing toward an initial public offering by mid-April. After its last round of funding in June 2017, the firm's implied valuation was $12.3 billion, according to PitchBook. However, in its latest filing on April 8, Pinterest indicated an IPO price range of $15-$17; the $16 per share midpoint represents nearly an $11 billion market capitalisation, below its last post-funding valuation. Assuming the IPO pricing remains in that range, we view Pinterest as an attractive investment opportunity.

We rate Pinterest as having a narrow economic moat or competitive advantage 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.

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About Author

Ali Mogharabi  is an equity analyst for Morningstar

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