Pinterest (PINS) Valuation: Weighing Record User Growth and New AI Ad Innovations

Pinterest (PINS) is back in the spotlight after announcing record-breaking monthly active user numbers and rolling out new AI-powered advertising tools. These headlines highlight Pinterest’s ongoing push to capture a bigger share of the fast-changing social commerce landscape. As investors react to robust user growth and expanding monetization efforts, many are rethinking what Pinterest could be worth in this new competitive environment.

Despite the buzz, the stock’s performance has been mixed. Over the past month, shares slipped nearly 6%. However, momentum has picked up again, with a 13% gain in the past 3 months and a 16% climb year-to-date. Looking further back, Pinterest has delivered a 55% return over three years, though the five-year picture remains slightly negative. The market’s response suggests optimism about growth while maintaining caution around profitability and competition from players such as Meta Platforms.

With attention focused on user metrics and product expansion, some investors are asking whether Pinterest is trading at a discount to its future potential or if the market has already priced in its next phase of growth.

Most Popular Narrative: 16.5% Undervalued

According to the narrative by Broke_Joe, Pinterest appears to be trading at a notable discount to its estimated fair value. There could be significant upside potential if key product and monetization developments occur as anticipated.

Pinterest has the potential to significantly grow both revenue and profitability over the next five years, driven by product innovation, improving monetization, and growing advertiser interest in high-intent audiences. Key catalysts include the deepening partnership with Amazon, the rollout of advanced ad tools and video formats, and international ARPU growth.

Are you ready to discover why some believe Pinterest’s financial future could be dramatically brighter than its current stock price suggests? The narrative is fueled by bold assumptions about rapid growth and expanding margins. However, the real suspense lies in the numbers behind this fair value call. Unlock the details to see what might push Pinterest far beyond its current valuation.

Result: Fair Value of $42.63 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slowing user growth or tougher competition in digital ads could challenge Pinterest’s optimistic outlook and limit the upside projected in these scenarios.

Find out about the key risks to this Pinterest narrative.

Another View: Testing the Numbers

Taking a step back from narrative-driven estimates, our DCF model also suggests Pinterest is undervalued based on its projected future cash flows. Could the numbers be revealing an opportunity that others are overlooking?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Pinterest for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Pinterest Narrative

If you have a different perspective or want to dig into the data and draw your own conclusions, it takes just a few minutes to craft your own narrative. do it your way.

A great starting point for your Pinterest research is our analysis highlighting 5 key rewards and 2 important warning signs that could impact your investment decision.

Looking for More Investment Opportunities?

Do not let your portfolio miss out on some of today’s most compelling themes. Take action and tap into handpicked stock ideas tailored to breakthrough technologies, strong dividends, and emerging market trends. Here is where you can get ahead of the curve right now:

• Supercharge your returns by browsing dividend stocks with yields > 3% for attractive yields and consistent income streams designed for stability-focused investors.
• Stay on the frontier by investigating AI penny stocks, which propel innovation in artificial intelligence and reshape industries for tomorrow.
• Strengthen your strategy by reviewing undervalued stocks based on cash flows for overlooked gems trading below their true worth based on solid future cash flows.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com