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1 Green Flag for Pinterest in 2022 and 1 Red Flag

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One carries a lot more weight than the other in determining Pinterests stock price.

Pinterest (PINS -3.91%) is having a rough start to 2022, with its stock falling almost 34% on the year as of this writing. The widespread economic reopening has not been good for the business as people spend more time away from home. The market is concerned about mounting user losses at the image-based social media platform, which is one of the red flags discussed further below. 

That said, Pinterest is building out its international monetization efforts, where most of its users are based, which is the green flag I will discuss first. 

Folks spent more time on Pinterest during economic lockdowns. Image source: Getty Images.

Expanding monetization efforts internationally is a green flag for Pinterest in 2022

Interestingly, out of Pinterest's 431 million monthly active users, 346 million are outside the U.S. Despite that parity, out of the $847 million in revenue that Pinterest earned in Q4 2021, $648 million was from the U.S. In the company's fourth-quarter conference call, CFO Todd Morgenfeld discussed why the international segment has lagged:

More broadly, we often get the question, why weren't we monetizing internationally quicker? And part of the reason was we wanted to get the user experience and the advertising experience right, both for our Pinners and to make sure we are delivering great results to our advertisers when we started to monetize internationally. And that's what we've done. We've proven that our full-funnel advertising platform works in the U.S.

The good news is that it's working to lift the international segment. In the fourth quarter ended Dec. 31, revenue from outside the U.S. increased by 61%, compared to just 11% domestically. The trend was also highlighted in the average revenue per user, which expanded by 62% internationally year over year in Q4 versus 25% in the U.S.

As it continues its efforts to monetize the international user segment more efficiently, it could be a tailwind for the rest of 2022. 

Mounting monthly active user losses is a red flag

Pinterest thrived at the pandemic onset when millions of folks, forced to spend more time at home, went looking for at-home activities. The image-based social media app has plenty of posts from creators inspiring activities that range from cooking to woodworking. However, as economies started reopening, the trend reversed. Therein lies the red flag for Pinterest in 2022.  

The company has lost monthly active users for three quarters in a row. In total, it has shed 45 million. With billions of doses of effective vaccines against COVID-19 administered worldwide, governments are cautiously optimistic about reopening more parts of their economies. Even when cases rise, governments are no longer resorting to stay-at-home orders. Unfortunately for Pinterest, that means monthly active user losses could continue and perhaps even gain momentum.

That's the primary reason investors have turned sour on Pinterest stock, sending it down 34% in 2022 and 73% from its high. It's evident from the market response that the red flag for Pinterest carries more weight than the green flag. Pinterest needs to address mounting user losses more than anything else to turn things around.

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