Pinterest, Zoom Surge As Tech ‘Unicorns’ Return To Favour

Matthew Broersma,

Shares trade higher in the start-ups, both of which have avoided the heavy losses typical of other high-flying tech debuts

Pinterest and Zoom traded sharply higher after their market debuts this week, indicating a renewed investor appetite for new tech shares after disappointments with firms such as Lyft.

Ride-hailing firm Lyft went public in March and is now trading well below its offering price, partly due to investor concerns about its steep losses, according to industry watchers.

But shares in Pinterest jumped nearly 30 percent, valuing the company at about $16 billion (£12bn), while Zoom Video Communications shares closed 72 percent above their IPO price of $36 on their first day of trading on Thursday.

Zoom’s chief financial officer, Kelly Steckelberg, said she saw the market as currently being “very favourable” to software-as-a-service companies, Reuters reported.

Unicorns

Zoom sells teleconferencing services, while Pinterest allows users to post interest-based collections of images.

Both pose a contrast to the typical “unicorn” – a firm valued at $1bn or more – in that such firms are often focused on rapid growth through heavy expenditures, leading to huge losses.

Pinterest had relatively low net losses of $63m in 2018, while Zoom is profitable and is still quickly expanding its user base.

By contrast, Snap, maker of the Snapchat app, lost $515m in the year before its market debut in 2017.

Pinterest, whose revenues are derived from advertising “pins” placed amongst user content, has also taken a far slower, more deliberate approach to revenue generation than social media firms such as Twitter or Facebook.

Advertising ‘challenge’

“We’re focused on building the best version of Pinterest we can over the next several years,” said Pinterest chief financial officer Todd Morgenfeld.

Some market analysts have said Pinterest could potentially show strong profits if it takes even 1 percent of the internet advertising market, whilst others were more measured.

Tom Forte, an analyst at D.A. Davidson, said the company has a “neutral” rating on Pinterest in part because the company is still developing its approach to advertising, an area in which it competes with giants such as Google.

He told CNBC television that Pinterest hasn’t yet made a serious effort to bring in revenues from users outside the US and that it would be a “challenge” for the company to do so.