Table of Contents
- The last Pinterest quarterly figures from December 2024
- Pinterest stock forecast 2025
- Key figures for Pinterest stocks from the HGI analysis
- Valuation of Pinterest Stock
- Conclusion on the Pinterest Stock
The online advertising market is booming and a provider like Pinterest (ISIN: US72352L1061) has established itself as one of the leading visual search and inspiration platforms in recent years. The company benefits from long-term trends such as the growing importance of visual content, personalized advertising and, of course, social commerce.
With strong user growth and increasing monetization, Pinterest has recently delivered impressive results. At the same time, the stock is highly valued, reflecting high expectations for future performance. However, the balance sheet ratios are deceptive due to high stock-based compensation. The strong free cash flow of almost one billion euros is outstanding. It has multiplied in recent years and is likely to increase further.
Source: Development of the Pinterest stock price
In contrast, market capitalization has recovered visibly after the long sell-off of the stock until 2022. At the time, we analyzed the stock and concluded that the valuation could be favorable if Pinterest managed to achieve double-digit growth. That has happened. The stock price immediately rose 66 percent over the last three years.
In this new Pinterest stock analysis, we look at the business model, the competition, the current financials and take a closer look at the valuation of the Pinterest stock to assess opportunities and risks for investors. Can it still be a buy?
Company profile – social media player
Founded in 2008, Pinterest essentially operates an online pinboard where users can pin their interests – interesting articles on external websites that fit well with the central discussions on the individual boards. They can be liked, commented on and recommended. Over the years, an intact community has formed here with now over 550 million active users.
Pinterest's business model is based on advertising revenue and the monetization of user interactions. Companies can place paid pins that appear in users' feeds and look almost the same as organic content. In addition, Pinterest offers various advertising formats such as video ads and carousel ads that companies can use to present their products in a visually appealing way. Another important component is shopping ads, which enable users to buy products directly through the platform or to obtain further information. Pinterest uses targeted personalization and data analysis to display relevant content and advertising, which is a key success factor in online advertising. However, the platform not only benefits from the booming online advertising market, but also from its character as a visual search engine. More and more users are actively searching for inspiration and purchase options, and they start with Pinterest. For advertisers, this means high conversion rates. By combining organic reach, targeted advertising and the ability to discover and buy products directly, Pinterest creates added value for companies and ultimately increases its own revenues.
Strong competition requires a niche focus
The market in which Pinterest operates is primarily characterized by strong competition, high user engagement and an increasing merger of social networks and e-commerce. Visual content plays a central role here, as consumers are increasingly inspired by images and videos before making purchasing decisions. Platforms that combine search-based content with personalized recommendations have a clear advantage. This applies in particular to the mass market, which Facebook has cornered with formats such as Instagram. Due to network effects, Mark Zuckerberg's network has a deep moat that cannot be crossed by smaller competitors. Specialization is therefore in demand. And Pinterest may have found it in the combination of social media and social commerce.
The growing importance of social commerce, i.e. the integration of shopping functions directly into social platforms, is giving companies like Pinterest a tailwind. Users expect not only inspiration, but also the opportunity to buy products immediately or to obtain further information. Companies are therefore increasingly investing in data-driven marketing and personalized advertising to address customers in a targeted manner. Technological innovations such as AI-based recommendations, image search and augmented reality are also influencing the market. Platforms that successfully implement these technologies can improve the user experience and increase their monetization opportunities. Data protection and changing advertising guidelines, in particular restrictions on the use of cookies and tracking data, also influence market dynamics and force companies to develop new strategies for user retention and acquisition. Only the largest players will survive here, along with those that can specialize.
The competition never sleeps in this market either
We know that the competition never sleeps. This is also the case with Pinterest. For example, it competes directly with several platforms that focus on visual content, social networks and e-commerce. The main competitors in this niche market include Instagram, TikTok and Google.
Instagram and TikTok also offer visually appealing content and are increasingly focusing on shopping features that allow users to buy products directly from the app. TikTok in particular has gained importance through its algorithm-based content feed and the integration of shopping features. Google, on the other hand, is an indirect competitor, as many users use Pinterest as a visual search engine to find inspiration for fashion, interior design or DIY projects. Google Images, Google Shopping or Google Lens offer similar functions here and can provide users with alternative ways to discover products.
In addition, there is competition from specialized platforms such as Etsy, which focus on handmade products. While Pinterest primarily impresses with its search and shopping list function, other platforms rely more heavily on social interaction or direct purchasing options. The competition is increasingly focusing on keeping users on the platform for as long as possible and seamlessly integrating purchasing processes.
The last Pinterest quarterly figures from December 2024
Despite fierce competition, Pinterest reached an important milestone in the last quarter by generating more than $1 billion in revenue in a single quarter for the first time. The California-based company saw a strong increase in monthly active users to 553 million – a new record. This shows that more and more people are using the platform more frequently and actively engaging with the content. The continued growth of the user base is also particularly encouraging. At 11 percent in the fourth quarter of 2024, it remains at a high level. There was also a significant increase in revenue per user. In the fourth quarter, it was $2.12 worldwide, 6 percent higher than in the same quarter of the previous year. In the important US market, the increase was as much as 12 percent. This shows that the monetization of the business continues to progress, particularly in the important US market.
Source: Pinterest financial data 2024; StocksGuide
Total revenue ended up rising 18 percent to $1.2 billion. Operating income increased by as much as a third to $262 million. Compared to previous quarters, however, there is a slight slowdown in growth momentum. On an annualized basis, revenue was 3.6 billion US dollars and EBIT was 180 million US dollars. The increase here is slightly higher at 19 percent.
Source: Pinterest financial data 2024; StocksGuide
The strong increase in net income is striking. It jumped due to a large tax refund of $1.6 billion. The more important free cash flow rose 55 percent to $940 million in full-year 2024. In the fourth quarter, however, momentum slowed with a one percent decline to $250 million.
CEO Bill Ready emphasized that the strategic direction is paying off. Pinterest is increasingly focusing on the “lower funnel,” which means that users can not only find inspiration but also make direct purchasing decisions. This development makes the platform more attractive for advertisers and improves monetization. In addition, Pinterest is emphasizing its position as a “positive platform”. This is less about hate speech, fake news or negative comments, which is seen as a long-term competitive advantage. Overall, the company is focusing on profitable growth and sustainable user retention while simultaneously increasing free cash flow.
Pinterest stock forecast 2025
Pinterest is optimistic about the first quarter of 2025 and expects year-over-year revenue growth of 13 to 15 percent. In constant currency, growth could even reach 15 to 17 percent, with exchange rate fluctuations being factored in as a slight headwind. In addition, the company expects a solid operating result with adjusted EBITDA between $155 million and $170 million. Compared to the first quarter of 2024, this would be a significant increase of 50 percent in the best case.
This forecast shows that Pinterest intends to continue on its growth trajectory, albeit at a slightly more moderate pace than in the previous quarter and year. However, I wouldn't read any signs of saturation into this yet. The improvement in profitability is convincing. The platform continues to focus on stronger monetization, more user engagement, and the expansion of advertising and shopping features to remain profitable in the long term.
And indeed: Pinterest's development is impressive from a historical perspective. The strong user growth and increasing advertising revenues confirm that the company's strategy is working. In particular, its focus on the lower funnel – the direct link between inspiration and the decision to buy – is making the platform increasingly attractive for advertisers. However, the expected growth in the first quarter of 2025 is expected to slow down somewhat, which shows that the market is becoming more difficult. Currency fluctuations also remain a factor that the company must keep an eye on. Finally, the business is becoming more and more international.
Overall, Pinterest seems to be well positioned. But there are also challenges to continue to hold its own against big players like Instagram, TikTok and Google. However, if Pinterest succeeds in further strengthening user loyalty and integrating the shopping area even more seamlessly into the platform, the online pinboard should be able to continue on its growth path.
Source: Forecast of Pinterest revenue; StocksGuide
Analysts also believe strong growth is possible: significant double-digit growth rates are expected to continue to be the norm until 2028. The revenue mark of 6.7 billion US dollars could then be exceeded. According to analysts, the associated growth would still be in the high single digits at eight percent.
Net profit is also expected to rise disproportionately. One explanation for this is, of course, the high scalability of the advertising business. An intact platform with a large active user community is, of course, a basic requirement for this.
Source: Development of Pinterest's net margin; StocksGuide
The net margin of 10.8 percent expected for 2025 is expected to almost double to almost 20 percent by 2029. Net profit of $1.3 billion would then be almost three times higher than the $455 million expected for 2025.
Key figures for Pinterest stocks from the HGI analysis
The High-Growth Investing analysis rates Pinterest stocks at 14 out of 18 points, which initially indicates a potential buy for the growth stock. This shows that the company is in a strong position in many areas, but also has weaknesses. We will examine these in more detail below
Source: Growth analysis of Pinterest
First of all, there is the EV/Sales value, which is 6.6 and basically reflects a solid valuation in relation to sales. The gross margin of 79 percent is also convincing and indicates high profitability. The low debt-equity ratio of 0.04 and the PEG ratio of 0.06 are also positive. Pinterest stock receives the highest number of points in all four categories. Pinterest stock receives an additional two points in the HGI analysis for the Rule of 40 score. It achieves a value of 45 percent, which is good but not enough to receive the highest possible number of points. However, the profitable growth is clearly visible, which could speak in favor of the stock as a long-term investment. One weak point is revenue growth, which was 19 percent last year and received no points in the HGI analysis. However, growth has increased in recent years, from just under 8.7 percent in 2022 to 9.0 percent in 2023 and finally to 19.4 percent in 2024. This trend is welcome. However, in the long term, higher growth rates of more than 20 percent annually would be needed for it to be possible to speak of a high-growth investment.
Overall, the analysis shows that Pinterest can be a strong company with high profitability and a healthy financial structure. Growth has improved recently, but remains an aspect that investors should keep an eye on.
Valuation of Pinterest Stock
The valuation of Pinterest stocks reflects the strong growth, but also the high expectations. With an expected P/E ratio of 59, the stock price is not cheap at first glance and implies that investors expect strong future earnings growth. However, the distorted earnings – for example due to stock-based compensation – are problematic. These amounted to USD 765 million in 2024 and are deducted from profits as an expense. However, they do not lead to a cash outflow in accounting terms, which strengthens cash flow. This is typical for high-growth companies. To motivate the entire team and retain them in the long term, a high degree of employee participation is often used.
At almost $1 billion, free cash flow over the past twelve months was well above the profit before deferred taxes of $216 million.
Source: Development of free cash flow and net profit, stockcharts.com Charts
But high development and marketing costs are also a burden. In 2024, Pinterest spent a combined total of almost $2.3 billion on these two items. However, they are fueling growth. A revenue multiple such as the EV/sales ratio is therefore more suitable. And this is currently 6.2, so Pinterest can be favorably valued in relation to sales. Particularly interesting in this context is the EV/FCF ratio of 24, which sets the valuation in relation to the free cash flow. Here, too, the value is initially ambitious compared to established companies, but not exaggerated for a company that continues to grow strongly and has a high degree of scalability. Measured by potential, the EV/FCF ratio could even be very attractive. Historically, it is below the long-term average of 28.
Source: Development of enterprise value/free cash flow of Pinterest
At first glance, Pinterest's stocks look highly valued overall. However, the company is showing solid operational development. If you look at adjusted values or the free cash flow, the picture is put into perspective. Ultimately, the question is whether Pinterest can sustain its strong growth and increase profits disproportionately in the long term to justify the valuation. To do that, the platform must continue to gain market stock and make monetization more efficient.
Conclusion on the Pinterest Stock
Pinterest has performed strongly in recent quarters and proved that its strategic focus on user growth and monetization is bearing fruit. With a new record in monthly active users and passing the billion-dollar revenue mark in a single quarter for the first time, the company is underlining its relevance in the digital advertising market. In particular, the focus on the “lower funnel”, i.e. the direct link between inspiration and the purchase decision, is making the platform increasingly attractive for advertisers and strengthening long-term monetization opportunities.
Despite the strong operating growth, at first glance the Pinterest stock is ambitiously valued. An expected P/E ratio of 59 and an EV/sales ratio of almost 7 show that a large part of the future growth is priced into the stock price. This means that even minor disappointments in the financial results could lead to a decline in the stock price. In the cyclical advertising market in particular, there is a risk of a rapid slowdown. However, the market is currently providing tailwind, and the niche focus and monetization strategy are taking effect. At the same time, the platform offers a clear competitive advantage over traditional social networks, which are increasingly struggling with problems such as toxic content and declining user loyalty, thanks to its visual search function and focus on a positive user experience.
Another important aspect is the development of social commerce. Pinterest is already well positioned here, but the market is highly competitive, especially from platforms like Instagram and TikTok, which are steadily expanding their shopping features. In the long term, the question is whether Pinterest can integrate its users even more closely into purchasing decisions in order to offer advertisers an even higher conversion rate. If it succeeds in doing so, the company could continue its growth trajectory and justify its high valuation. In that case, even significantly higher prices would be possible.
In view of the high growth, I consider the multiple of 25 on the free cash flow to be very favorable. With a bit of luck, the Pinterest stock could be an exciting company with potential. However, there are also corresponding risks. Investors should closely monitor whether user growth continues, monetization is further advanced and the company can maintain its market position against the competition.
Source: Analysts' opinions on Pinterest stocks
Analysts continue to see the stock price rising. Almost 76 percent of the 34 analysts now tend to buy. Around one in five consider the Pinterest stock to be a good holding position. Only two percent or one analyst considers a sale to be justified. At just under $37, the average price target is almost 25 percent higher than the current price.
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The author and/or persons or companies associated with the StocksGuide own or may own stocks in Pinterest. This article represents an expression of opinion and not investment advice. Please note the legal information.
