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The social media space is becoming fiercely competitive, with multiple platforms competing for user engagement. Pinterest (PINS) has carved out a niche by offering a unique way for users to explore and share ideas through visual content. The platform saw a surge in popularity during the pandemic when social media became a primary source of engagement. However, in today’s post-pandemic environment, questions remain about Pinterest’s ability to sustain its growth.
PINS stock declined 19.9% last year, underperforming the S&P 500 Index’s ($SPX) 24% gain. However, it has rebounded by 14.5% so far this year. Let’s find out if this growth stock is worth pinning to your portfolio in 2025.
Since its inception in 2009, the company has grown into a key player in digital advertising, drawing users and advertisers with its visually driven platform. It has become a preferred destination for millions seeking inspiration in areas such as fashion, home design, cooking, travel, and more.
Pinterest is not just a social media platform, but it is a vibrant community where users curate and organize themed image collections called “boards,” allowing them to save and share content that aligns with their interests.
Pinterest’s Growth Journey Is Impressive
Under the leadership of CEO Bill Ready, Pinterest has seen significant progress. In the third quarter, the platform’s global monthly active users (MAUs) hit a record 537 million, reflecting an 11% year-over-year increase. Growth was widespread, with 99 million users in the U.S. and Canada, 139 million in Europe, and the remainder across other regions. Additionally, the company reported a 5% rise in global average revenue per user, driven mainly by expansion in North America. Overall, total revenue grew 18% year-over-year to $898 million, slightly surpassing analyst expectations. Adjusted net income surged 42% to $275 million for the quarter, with net income margins improving to 3%, up from 1% in the prior year.
To enhance user engagement and improve ad performance, Pinterest has heavily invested in artificial intelligence (AI), enabling more personalized content recommendations and better ad targeting. Management emphasized that AI has been instrumental in transforming the business over the past two years, with Pinterest’s AI models generating over 400 million predictions per second to connect users with new brands, products, and trends.
The company is also developing lower-funnel ad solutions to attract advertisers seeking direct response outcomes. Pinterest has strengthened its ad business through key partnerships, including a collaboration with Amazon (AMZN) to display third-party ads that direct users to Amazon for purchases. Additionally, its partnership with Google (GOOGL) allows Pinterest to leverage Google’s Ad Manager to facilitate advertising on the platform. As management highlighted in the Q3 earnings call, both initiatives are contributing to the company’s growth.
While AI investments are expected to enhance user engagement, Pinterest must ensure it maintains financial discipline to avoid straining its balance sheet. Currently, the company is in a strong financial position, having ended Q3 with $2.43 billion in cash, cash equivalents, and marketable securities. The company also repurchased $466 million worth of shares in the quarter. For the fourth quarter, management projects revenue growth between 15% and 17%, ranging from $1.12 billion to $1.14 billion, aligning with analysts’ expectations. Analysts also estimate a profit of $0.65 per share.
Is PINS Stock a Buy?
Overall, Wall Street views Pinterest as a “Moderate Buy.” Among the 32 analysts covering the stock, 20 recommend a “Strong Buy,” two rate it as a “Moderate Buy,” and 10 suggest holding. The average analyst price target of $39.98 implies potential upside of approximately 20.9% over the next year. Additionally, the highest price target of $49 indicates the stock could surge by up to 48.2% within the same period.
With a forward price-to-earnings ratio of 18x based on projected 2025 earnings, Pinterest appears to be a fairly valued growth stock.
The Verdict
Pinterest’s unique platform continues to attract a growing user base and offers innovative advertising solutions. Although the company has shown strength in both revenue and user engagement, it must carefully manage challenges related to advertiser spending and rising operational costs. While competition in the social media and digital advertising space is rising, Pinterest’s long-term potential remains promising, particularly with AI-driven advancements and its distinctive platform. If its strategic initiatives continue to strengthen its financial performance, the stock could prove to be a valuable long-term investment.
