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We came across a bullish thesis on Pinterest, Inc. (PINS) on Long-Term Pick’s Substack by Dan. In this article, we will summarize the bulls’ thesis on PINS. Pinterest, Inc. (PINS)'s share was trading at $28.99 as of Nov 18th. PINS’s trailing and forward P/E were 90.59 and 16.03 respectively according to Yahoo Finance.
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Pinterest (PINS) presents a compelling investment opportunity as the most undervalued social media stock, backed by strong operational performance and promising growth catalysts. In Q3 2024, the company achieved record-breaking metrics, including a revenue of $898 million, up 18% year-over-year, and an adjusted EBITDA margin of 27%, reflecting a 280 basis point improvement. Monthly Active Users (MAUs) surged to 537 million, growing 11% year-over-year, with significant contributions from international markets, where revenue in regions like Europe and the Rest of the World grew 20% and 38%, respectively. The U.S. and Canada, Pinterest’s core markets, demonstrated resilience, with revenues up 16%, underscoring the platform's robust monetization capabilities.
Pinterest's strategic integration of AI into its platform has driven actionable engagement, improving ad relevance and cost-efficiency, and enhancing the overall user experience. Initiatives like the AI-driven Performance+ tool, which reduces cost per action by 10%, and expanded partnerships with Amazon Ads have fortified its competitive position in the advertising space. These developments have fueled a 41% year-over-year increase in ad impressions, offsetting challenges such as a 17% decline in ad pricing caused by international market shifts.
Despite macroeconomic headwinds, particularly in the food and beverage subsector, and the early-stage adoption of new features like Performance+, Pinterest has demonstrated its ability to navigate challenges while maintaining solid growth. Its international expansion, though in its nascent phase, offers significant untapped potential, providing a long-term revenue growth avenue.
The company’s balance sheet remains strong, with $2.4 billion in cash and equivalents, enabling flexibility for continued share repurchases, which reached $466 million in Q3 and $500 million year-to-date. With Q4 revenue guidance of $1.125 billion to $1.145 billion, reflecting 15% to 17% growth year-over-year, Pinterest’s outlook remains optimistic. At a current price of $29.37, the stock trades at a significant discount to its base-case target price of $42.92, offering an attractive entry point and substantial upside potential for investors.