How High Will Pinterest Stock Go?

The pandemic had a dramatic impact on many companies. Supply chain issues and staffing shortages caused deep revenue losses for some businesses, but other companies excelled in the home-centric environment.

Pinterest (NYSE: PINS) was part of the latter group, as homebound users turned to the social media platform to connect with other users about their hobbies and interests. More customers led to more revenue, and, consequently, PINS surged above $85 in 2021.

Since then, the stock has dropped back to earth, even falling below $20 by mid-2022. However, as Pinterest stabilized its revenues and rebuilt its user base over the past few years, investors have returned to PINS. The stock is up over 84% in the past 12 months.

That might cause some investors to believe PINS has hit its ceiling, but as the stock is currently trading at $44, it’s still a far cry from where it was a few years ago. Pinterest has continued to beat revenues and earnings expectations and it’s been building popularity with younger users as a result of its targeted investment in AI.

518 Million Reasons To Own Pinterest

After Pinterest reported its earnings for Q1 2024, its share price popped 33%. However, the stock had been on a downtrend since the company slightly missed revenue expectations in the 4th quarter of 2023. Even though Pinterest shares jumped substantially after the April earnings release, it was more a case of PINS resuming its upward climb.

The company’s Q1 revenue nearly doubled from Q4 FY23, and it was a 23% year-over-year increase. Revenue of $740 million also beat estimates by 5.7%. The company took a net loss of $25 million in the quarter, but that was an 88% improvement over the $208.5 million net loss last year.

Diluted earnings per share of -$0.04 was 48.8% better than what analysts expected. It was a return to form, as Pinterest had similar earnings beats in the 2nd and 3rd quarters of 2023.

The company also hit a record high of 518 million monthly active users in Q1, a 12% year-over-year increase. While revenue gains were consistent across the globe, MAU growth was highest outside of America, Canada, and Europe.

The 1st quarter increases were the fastest user and revenue growth the company has seen since 2021, according to Pinterest’s leadership.

“Thanks to our investments in AI and shopability, we’re driving even greater returns for advertisers and gaining access to performance budgets,” Pinterest CEO Bill Ready said. “We’re executing with tremendous clarity and focus, shipping new products and experiences that users want, and in doing so, we’re finding our best product market fit in years.”

Will Pinterest Stock Go Back Up?

Pinterest might not be considered an AI company like NVIDIA or Microsoft, but it began integrating artificial intelligence into its platform in 2022.

The company has most notably used artificial intelligence to power a feature called collages. The feature was first introduced in Pinterest’s iOS app Shuffles but it became so popular, especially with younger users, that the company introduced it into the main platform as well.

The collage format gives users the ability to draw from videos, images, and web content and create a board that reflects their interests. For example, a user might create a collage of decorating or outfit ideas, and many of its featured products can be purchased directly through Pinterest.

“Users are roughly three times more likely to save collage Pins versus other Pins on Pinterest, and a significant portion contain clickable products,” Ready said. “We’re also continuing to see collages gain traction with Gen Z, who are nearly 70% of collage creators. Furthermore, improving the actionability of Pins is another core tenet of improving user satisfaction, deepening engagement, and growing MAUs.”

Gen Z now accounts for 40% of all Pinterest users, and adoption by the younger demographic is unique for a 14-year-old social media platform. The company also hopes the constant interaction between its AI models and its users will continue to keep the platform on the cutting edge.

How High Will Pinterest Stock Go?

The consensus forecast among analysts is for Pinterest stock to go higher by 4.6% to a price target of $46.16 per share.

Even though PINS has rallied back after a dismal 4th quarter, Wall Street analysts believe the stock has room to rise. Out of 38 analysts who have rated PINS, 27 rate it as a Buy. 5 of those analysts believe the stock will outperform the market over the next 12 months.

The highest forecast has Pinterest shares jumping 17.9% to $52 over the next year. No Sell ratings exist on PINS but there are 11 Hold recommendations. The lowest estimate forecasts the stock will drop by 22.9% to $34 per share over the next year.

Is Pinterest Stock Undervalued?

While the analysts are still bullish, the average price target might seem a little low given the company’s expanding user base. Part of the reason why is perhaps that the stock has already rallied back significantly.

Pinterest currently has a price-to-sales ratio of 9.3x, which might seem to sway the stock toward the overvalued end of the spectrum.

It is a little higher than some of the company’s social media competitors. Snap, Inc., which operates Snapchat, currently has a P/S of 5.15x, while operator Match Group has a P/S of 2.7x.

Pinterest’s valuation is more in line with Facebook-owner Meta, which has a P/S of 9.01.

Is Pinterest Stock a Buy or Sell?

A promising aspect of Pinterest is that it only has about 16% of the users Facebook has, so there is still plenty of room for growth.

The company has caught on with younger and international users which should continue to fuel revenue growth for years to come. Pinterest has smartly invested in AI and found a niche its competitors don’t serve.

After a disappointing 4th quarter, the stock seems ready to rebound, and it certainly has the potential to go higher. Pinterest shares are trading around 95% lower than where they were in 2021.

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