We recently compiled a list of 10 Best Internet Content Stocks to Buy. In this article, we will look at where Pinterest, Inc. (NYSE:PINS) ranks among the best internet content stocks.
According to Grand View Research, The global digital content creation market value stood at $25.6 billion in 2022 and is projected to grow at a CAGR of 13.5% from 2023 to 2030. In 2023, North America dominated the digital content market. The primary drivers are the increasing use of social media and the digital change occurring across different industries. According to a study by Kepios, 62.3% of individuals in the entire globe use social media. As of April 2024, the average daily usage is 2 hours and 23 minutes per this study. Kepios analysis reveals that the number of people using social media grew meaningfully during the first three months of 2024, and annual growth rates are still significantly more than 5%.
Content creation is also being transformed by artificial intelligence. According to Custom Market Insights, the global market for AI-powered content creation was valued at $2.3 billion in 2024 and is projected to grow at a compound annual growth rate of 7.7% to reach USD 7.9 billion by 2033. Moreover, AI programs like GPT-4 are being used to generate graphics, music, and text. Gartner projects that 30% of all digital content will be artificial intelligence generated by 2025. This facilitates hyperpersonalization, which allows material to be personalized to specific consumers while also streamlining the content creation process.
Secondly, the popularity of short-form video material is skyrocketing, emerging as a major trend in the content production industry. Platforms like Instagram Reels and TikTok have paved the way for this movement. In 2024, 85% of marketers anticipate short-form videos to be the most successful type of social media content, according to a HubSpot survey. The snackable aspect of this format makes it ideal for grabbing the attention spans of increasingly transient internet consumers.
Thirdly, digital content is projected to become more interactive in the future. Advancements in virtual reality (VR) and augmented reality (AR) are opening up greater opportunities for immersive experiences. The AR and VR market is expected to reach $1.5 trillion by 2030, according to a PwC report.
If we take a broader view, according to the PWC’s Global Entertainment & Media Outlook 2024-2028, there are a number of significant growth prospects in the industry, which is expected to reach US$3.4 trillion by 2028. Notwithstanding persistent upheavals and the necessity of reinventing company models, the industry presents substantial income opportunities. Growth is anticipated to be driven by advertising, with spending forecast to reach US $1 trillion by 2026 because of connected TV and internet advertisements. Due to market saturation, streaming services are being forced to investigate ad-supported business models and creative content. Revenues from gaming are predicted to surpass $300 billion by 2028, particularly in Asia Pacific. The industry is still thriving. Companies navigating shifting market dynamics will find more opportunities in high-growth regions and market categories.
Methodology:
We sifted through holdings of Internet Content ETFs and online rankings to form an initial list of 20 Internet Content stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
Pinterest, Inc. (NYSE:PINS)
Number of Hedge Fund Investors: 61
Pinterest, Inc. (NYSE:PINS) is an online resource for finding products and ideas that assist users in generating inspiration for everything from recipes to vacation spots. Since its founding in 2010, the network has attracted a predominantly female user base, making up about two-thirds of its over 500 million monthly active users. The firm sells digital ads to make revenue, and it is currently expanding its in-platform e-commerce offerings. Although the US and Canada account for 20% of users, the area generated 80% of income in 2023. Its goal is to take a portion of the global market for digital advertising.
Pinterest boasts 522 million monthly active users, 40% of whom are Gen Z. The platform focuses on video content and AI-powered features like “The Yes” to improve the user experience and boost engagement. Pinterest has been working on strengthening its e-commerce and advertising capabilities with the support of its strategic alliance with Amazon.
Pinterest has the ability to attract a large user base that is growing by 12% year on year and comes to the platform to discover new products or ideas. This intent-driven user behavior is very useful to advertisers because it leads to higher engagement rates and thus a higher conversion rate, allowing Pinterest to charge a premium for its services. Pinterest’s average revenue per user in the US and Canada was $6.85. In the first half of 2024, CFO amounted to $462.6 million. Pinterest projects sales of $885-900 million in Q3 2024, or a 16-18% YoY growth. By 2028, they also anticipate operating margins to reach 22%.
Columbia Contrarian Core Fund stated the following regarding Pinterest, Inc. (NYSE:PINS) in its Q2 2024 investor letter:
“Pinterest, Inc. (NYSE:PINS) – Pinterest delivered first-quarter results at the end of April that were nicely ahead of both consensus expectations and company guidance, resulting in a 6% revenue beat and a 45% free cash flow beat. Its share price rose following the earnings release and continued to move higher throughout the quarter. The company’s prospects should continue to improve as Pinterest is starting to take more and more of its advertisers’ budgets, as its data-rich initiatives are starting to pay greater dividends. Pinterest is a visual search engine with very high commercial intent and exposure to e-commerce growth. E-commerce growth has been a significant driver of global digital ad spending, which is an approximately $400 billion global market.”
With a buy recommendation and a $43 price target, Deutsche Bank analyst Benjamin Black started monitoring the company. According to the analyst, Pinterest draws wealthy users with strong purchase intent and is a large, highly individualized “digital catalog” that is “under-monetized.”
Cristan Blackman’s Empirical Capital Partners is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 268,024 shares worth $11.812 million as of Q2.
Overall PINS ranks 9th on our list of the best internet content stocks to buy. While we acknowledge the potential of PINS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PINS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.
