Billionaire Israel Englander is the founder and CEO of Millennium Management, the second-most profitable hedge fund in history when measured by net profit since inception, according to LCH Investments. That makes him a good case study for investors.
Englander sold 4.5 million shares Palantir(NYSE:PLTR) during the third quarter, reducing its stake by 90%. Meanwhile, he also bought 2.5 million shares of Pinterest(NYSE: PIN Codes)a company we collaborated with Amazon And Alphabet‘s Google wants to stimulate advertising demand on its social platform. That increased Millennium’s stake in Pinterest by 310%.
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England’s trades are in line with Wall Street’s prospects. Specifically, Palantir has an average target price of $38 per share, which implies 41% downside from the current share price of $64. But Pinterest has an average target of $40 per share, which represents a 33% upside from the current share price of $30.
Here’s what investors need to know about Pinterest.
Pinterest is a social media company that focuses on inspiration rather than communication. The platform relies on artificial intelligence (AI) to help users discover new ideas and products, ranging from recipes and tutorials to food and fashion. Pinterest generates revenue through advertisements. And although its user base is much smaller than that of Metaplatformsit still ranks among the 15 largest ad tech companies in the world.
Pinterest introduced new AI tools for advertisers earlier this year. One such tool – Performance+ – relies on generative AI to enhance product images with backgrounds tailored to users’ tastes. Similarly, Performance+ leans on AI to streamline campaign creation and improve results. CEO Bill Ready said: “Our AI investments drive results by enabling better personalized experiences and better performance for advertisers.”
Pinterest reported solid financial results in the third quarter, exceeding expectations on the top and bottom lines. Monthly active users increased 11% to 537 million, and engagement improved across all three major geographic regions. In turn, revenue rose 18% to $898 million, and non-GAAP net income rose 43% to $0.40 per share.
However, Pinterest’s guidelines disappointed Wall Street. Revenue is expected to rise 16% in the fourth quarter, while analysts had expected 17% revenue growth. But management attributed this sequential slowdown to weakness among food and beverage advertisers facing macroeconomic headwinds, which are ultimately a temporary problem.
Image source: Getty Images.
Pinterest opened its social platform to demand from third-party advertisers and has since partnered with two of the world’s three largest ad tech companies.
More specifically, Pinterest announced a partnership with Amazon last year that brought retail advertising to its platform in the US, and the partnership recently expanded to Canada and Mexico. Similarly, earlier this year, the company announced a partnership with Google in previously under-monetized international markets.
Importantly, both partnerships bring more advertising content to Pinterest, allowing Pinterest to offer relevant and shoppable products. Management believes that strategy can meaningfully drive sales in the future. CEO Bill Ready recently told analysts, “It’s still significantly under-monetized as a platform relative to the amount of commercial intent on the platform.”
Pinterest looks cheap by historical standards. Shares trade at 5.9 times sales. That is actually the lowest valuation of the past year, and is below the three-year average of 6.7 times sales. Furthermore, Wall Street expects the company’s adjusted earnings to grow 21% annually through 2025. That makes the current valuation of 21 times adjusted earnings a bargain.
By comparison, Wall Street expects Palantir’s adjusted profits to rise 27% annually through 2025. That makes the current valuation of 190 times adjusted earnings absurdly expensive. Therefore, Israel Englander’s decision to reduce his stake in Palantir was wise, as was his decision to increase his position on Pinterest.
Consider the following before buying shares on Pinterest:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Trevor Jennewine holds positions at Amazon, Palantir Technologies and Pinterest. The Motley Fool holds positions in and recommends Alphabet, Amazon, Meta Platforms, Palantir Technologies and Pinterest. The Motley Fool has a disclosure policy.
Billionaire Israel Englander sold 90% of his Palantir shares and buys AI stock in partnership with Amazon and Google was originally published by The Motley Fool
