Is Pinterest Stock a Buy for 2024?

Food delivery apps like DoorDash and Uber Eats increased customers by 70% during the 2020-21 shutdowns. Social media platforms like Meta and Snap flourished as users looked for innovative ways to make personal connections. That search led many to Pinterest (NYSE: PINS).

The social media platform gave its users a way to share their passions and discover new interests during a difficult time. The app’s adoption sent PINS, which had been lagging at $12 per share in early 2020, soaring up over $85 per share in a little more than a year.

A year after that, however, Pinterest shares came crashing back to earth. Revenue growth hit a snag in 2022, and the stock plummeted back down under $20 per share. Investors started to wonder if Pinterest’s 2021 heyday was just a fad.

In 2023, Pinterest proved those fears to be unfounded as the company delivered revenue and earnings growth. Pinterest turned a profit in the 3rd quarter of 2023, a positive turnaround from reporting a number in the red the prior year. With the stock up 63% year-to-date, is Pinterest stock a buy for 2024?

What Made Pinterest Stock Increase?

Pinterest has logged three straight quarters of revenue and profits that exceeded analysts’ expectations. In the 3rd quarter of 2023, the company’s $763 million in revenue represented an 11% increase from 2022. It also beat analysts estimates by 2.67%.

Net income was an even bigger beat as Pinterest swung from a net loss of $65.2 million in the same quarter of 2022 to a profit of $6.7 million in the 3rd quarter.

Earnings per share (EPS) of $0.28 was 40% higher than EPS expectations of $0.20. That was enough to send the stock up almost 20% in one day. All told, PINS has jumped 55% since the earnings release.

Global Monthly Active Users increased by 8% to 482 million, a high-water mark for the company. It experienced the highest growth with users outside of the US, Canada, and Europe. The continued growth in overseas users is promising for the firm because it’s something the company hopes to leverage for many years to come.

Another factor behind revenue growth is the company’s early adoption of AI technology to improve shopping recommendations for its users, and that has streamlined the company’s e-commerce engine.

The creation of sponsored pins (posts) on its platform allows users to purchase products from the company’s partners, Amazon for instance, right on Pinterest’s platform. This enhanced ability to drive revenue bolsters the company’s traditional revenue stream from advertising.

Will Pinterest Stock Keep Going Up?

But those aren’t the only good things going for Pinterest. Perhaps the most positive sign is the company’s increasing popularity with Gen Z, which now makes up around 40% of the company’s users. That’s impressive given the heightened competition for the younger generation’s clicks from bigger platforms like TikTok, Snapchat, and Instagram.

There are indications that Pinterest is viewed as a safer social media platform compared to those same competitors. So far, the company hasn’t been plagued with the polarizing content that Facebook and X have suffered from. Pinterest has also made a concerted effort to cultivate creativity over likes.

Given the company’s growth with both global and Gen Z users, Pinterest’s top brass feels confident the company will continue its revenue pace of 11%-15% growth in the fourth quarter.

With all the positive news, it may look like PINS has many bullish forces propelling it higher. However, there are concerns about the rising cost of doing business. Total expenses were up 2% from $753 million last year to $768.2 million in the 3rd quarter. There are also concerns that the war in Israel might impact the company’s advertising revenue for the 4th quarter, as it has with Meta.

What Do Analysts Say About Pinterest Stock?

Of the 37 analysts who have weighed in on PINS, 25 rate it as a Buy. 4 of those analysts believe the stock will outperform the market in 2024. The highest forecast has the stock jumping 28.5% to $48.

But the consensus among all the analysts is that Pinterest stock will only rise by 1.7% in 2024 and reach $38 per share. It’s worthwhile to note that there still isn’t a Sell rating on PINS with the remaining analysts assessing the stock as a Hold. The lowest forecast, though, does estimate the stock will decline by 33% to $25 per share in the coming year.

Is Pinterest Stock Undervalued?

The consensus on Wall Street, then, is that the lion’s share of the stock’s gains are behind it. Pinterest’s price-to-sales ratio is currently around 8x. While that’s not far out of line with the PS ratio Meta and Snap trade at, it does represent a slight premium.

There is still a case for Pinterest as being undervalued at this price point, however, given that the stock traded over 50% higher just a few years ago.

Is Pinterest Stock a Buy for 2024?

The consensus among analysts is that Pinterest has only 2% upside potential to fair value in 2024.

Pinterest had a great 2023 and proved its naysayers wrong by continuing to build inroads with younger users. Management successfully leveraged artificial intelligence to enhance e-commerce operations on the platform and it seems poised to continue financial growth, albeit at a slower pace

The main concern for potential PINS investors is that the stock’s boom is over. While 2024 may bring improving fundamentals, the share price may have already discounted the good news coming on the financial statements.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.