By Jacob Sonenshine
Our Pinterest recommendation has performed poorly. Shares are down 69% since we picked it exactly a year ago as the company's growth has fallen short of expectations.
We did acknowledge concern about Pinterest's near-term growth prospects in our original thesis. We just thought growth would be more consistent, hovering in the midteens in percentage terms, than it was.
So it turns out, the market did indeed have reason for concern. Analysts reduced earnings expectations and profit margin forecasts as sales growth hasn't accelerated as expected. Pinterest, like many internet companies, must often ratchet marketing and other spend higher to compete.
Relatedly, it has seemed Pinterest always has an area of advertiser demand that's ailing just enough to curb growth. For a while, it was soft spending from food advertisers. Then, it was soft Canada revenue in the wake of tariffs. The story keeps not quite working.
The good news is that the worst appears to be behind us. Last quarter's earnings certainly provide reason to believe this. Revenue growth looks to have stabilized, and we've already seen that stabilizing growth can coincide with stock gains from extremely cheap levels.
The business looks strong enough to lift the stock from this point. We can't advise selling the stock at just over $20/share, given that it more than doubled from the low $20s in early 2023 to mid-2024. It dropped again to the mid $20s in early 2025 before adding 50% in less than year.
Can it do the trick again? We think so.
First quarter sales reported in early May -- which caused the stock to jump the next day -- grew 15% year over year, excluding currency fluctuations, with the reported number coming in at a hair over $1 billion. Organic growth came from a mix of monthly active user growth to 631 million and higher average revenue per user, as more ad money moves to the platform, partly driven by the company's improving ad technology and data offerings.
These trends are positive. The market knows Pinterest is no longer trying to grow sales 20%, but it can now worry far less about the lowest organic growth it has seen since the start of 2024, which was 13%. From last 2024's first quarter to this year's first quarter, sales have grown 16% annually.
Clearly, the company's strategy of finding new users throughout the world, and monetizing them with up-to-date ad offerings and easy click-through technology for users who want to buy a marketed product they like, is working well enough.
"We view the print as an encouraging early proof point that mgmt.'s strategic playbook -- broadening the revenue base beyond the largest retailers, deepening Performance+ adoption [Pinterest's ad performance tracker], etc. -- is starting to translate into tangible results," writes Evercore analyst Mark Mahaney.
Those results can continue. Don't forget, Pinterest often beats revenue estimates, especially after management lowers the bar for expectations. It has beaten analysts top-line projections in seven of the past nine quarters, according to FactSet, and the two misses were no greater than 1%. This provides more assurance that the growth outlook is stable.
Analysts now forecast earnings to grow a couple percentage points faster than sales for the coming three years, as the operating margin expands to just over 32% by 2029. That's reasonable -- and hopefully beatable -- as it's not even close to Meta Platforms' almost 43%.
The resulting earnings growth can boost the valuation, which is currently 7.5 times enterprise value-to-ebitda (earnings before interest, tax, depreciation and amortization for the coming 12 months). That's almost half of the S&P 500's enterprise value to Ebitda multiple and below the over 10 times for Etsy and eBay -- two internet peers to Pinterest that have recently seen their stocks rebound from some dark days.
That's the type of opportunity Elliott Management sees, just in case anyone needs some extra comfort. Elliottm an activist hedge fund lead by billionaire Paul Singer, invested $1 billion into the business in early March of 2023. The firm has had much success with beaten-down stocks, recently including Southwest Airlines and Dexcom.
So while it might feel scary to buy more Pinterest here, it's probably a better idea than selling a stock that's already way down. It rallied all the way to $44 in 2024.
That kind of return is like finding a needle -- or a pin -- in a haystack.
Jacob Sonenshine is a stock picks writer at Barron's Investor Circle and regular contributor to The Trader Column. His general focus is technology, consumer, industrial, and healthcare.
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June 19, 2026 03:12 ET (07:12 GMT)
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