Is Pinterest a Buy Following Q4 Results?
Pinterest stock is down almost 70% from record highs, making the social-media stock a compelling buy for value and growth investors.
Feb. 10, 2022

Similar to most other growth stocks, shares of Pinterest (NYSE: PINS) have remained volatile in the last few months. The company went public back in April 2019 and priced its shares at $19. PINS stock touched an all-time high of $86 last February before falling by almost 70% to currently trade at $26.80.

Let's see if the pullback provides investors with a buying opportunity right now.

The bull case for Pinterest stock

Pinterest is a visual discovery engine, and the social-media company is valued at a market cap of $17.63 billion. It has increased sales from $755.9 million in 2018 to $2.57 billion in 2021, indicating an annual growth rate of 50%.

Analysts expect revenue to rise by 22% to $3.14 billion in 2022 and by 27.7% to $4 billion in 2023. Its adjusted earnings are forecast to expand from $1.13 in 2021 to $1.4 in 2023. We can see that PINS stock is trading at a forward price to 2022 sales multiple of 5.60x and a price to earnings multiple of 24.4x, which is quite reasonable.

Pinterest reported sales of $847 million and adjusted earnings of $0.49 per share in Q4 of 2021. Comparatively, Wall Street forecast sales of $827 million and earnings of $0.45 per share in the quarter.

The social-media company explained it aims to improve user engagement by introducing formats such as short-form video, which should increase the consumer's shopping intent. So, advertisers will now target customers with a higher interest, thereby improving value for all stakeholders.

Going forward, Pinterest might also add AR or augmented reality components to expand its monthly active users (MAUs) and drive top-line growth higher.

The bear case for Pinterest stock

Pinterest's MAUs declined by 6% year over year to 431 million in Q4 of 2021. The company's user base peaked at 478 million in Q1 of 2021 and has since fallen steadily in the following nine months. One key reason is the emergence of other social media platforms such as TikTok, the unwinding of the pandemic, and lower search traffic.

While the average revenue per user for Pinterest rose by 23% to $1.94 in Q4, investors should note that the international user generates just $0.38 for the company compared to a user based in the U.S. that brings in $5.55.

International users account for 80% of Pinterest's total user base, and the company will have to expand its ARPU metrics consistently to drive revenues higher.

So, should I buy Pinterest stock?

Analysts tracking PINS stock have a 12-month average price target of $41.86, which is 56% higher than its current trading price. Pinterest's attractive valuation and massive upside potential coupled with its increasing ARPU make it a top bet right now.

Quickfire round:

Does Pinterest stock pay dividends?

No, Pinterest stock does not pay investors a dividend.

Will PINS stock recover?

Analysts expect PINS stock to rise by more than 50% in the next 12-months.

Is PINS stock overvalued?

PINS stock is reasonably valued at current prices given its price to earnings multiple.

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