I Liked Pinterest At $30, But I Like It More At $25

The stock market is a fickle judge. Few companies know this better than Pinterest (PINS), whose shares have oscillated wildly between $23 and $40 over the past year, reflecting a market torn between optimism and skepticism. Investors who were bullish on Pinterest at $30 might now find themselves even more intrigued at $25—a price that, while punishing in the short term, may have stripped away the froth to reveal a compelling opportunity.

The stock’s recent decline—from a $30.90 open in January to a $25.26 close on April 17—has been steep, but the reasons behind it are instructive. Pinterest’s Q4 2024 results, while showing record revenue of $1.154 billion (up 18% year-over-year), were overshadowed by a $0.30 earnings-per-share (EPS) miss. The EPS of $0.33 fell far short of the $0.63 consensus, sparking a 34% sell-off by April. Yet buried in that report were signs of a company making progress in areas that could matter far more than quarterly volatility: user growth, AI-driven engagement, and strategic investments.

Consider the data: Pinterest now boasts 550 million global monthly active users (MAUs), a milestone achieved through relentless focus on its core mission—connecting people to ideas. In the U.S. and Canada alone, MAUs hit 100 million, a figure that underscores its dominance in the “lower-funnel” advertising space, where users are closer to making purchases. Meanwhile, its AI initiatives, including the AI-powered “Performance Plus” tool for advertisers, have already shown tangible results: saves increased by 250 basis points, and outbound clicks rose by 150 basis points. These metrics suggest Pinterest is finally unlocking the potential of its massive user base to generate higher ad revenue.

The recent price drop also appears to have discounted near-term risks. The stock’s volatility has long been tied to earnings reports, with shares falling sharply after both Q2 and Q3 2024 results. But this time, the market’s reaction may have overcorrected. Analysts now project a $0.26 EPS for Q1 2025, a 10% increase over the same period last year, and full-year EPS growth of 46.67% to $0.88. If Pinterest can meet these modest targets while expanding its user base and monetization efforts, the stock could rebound sharply.

The company’s balance sheet further bolsters its case. Pinterest returned $600 million to shareholders in 2024, including an additional $100 million in Q4, signaling financial strength. Its adjusted EBITDA surged 50% year-over-year to over $1 billion annually, a figure that suggests cost discipline amid growth. And while ad pricing headwinds remain a concern in the digital advertising sector, Pinterest’s focus on performance-based ads—a niche with higher margins—could insulate it from broader industry softness.

Of course, risks persist. The stock’s decline reflects lingering doubts about Pinterest’s ability to convert user engagement into sustainable revenue. Its Q4 ad revenue grew 18%, but competition from TikTok and Google’s Gemini AI continues to intensify. Still, the company’s path forward is clear: execute on AI-driven personalization, expand its ad product suite, and leverage its unique position as a visual discovery platform.

The $25 price tag now offers a margin of safety. At this level, Pinterest trades at just 28x the consensus 2025 EPS of $0.88—a significant discount to its 5-year average P/E of 45. Meanwhile, its revenue growth of 19% in 2024 is on pace to outstrip peers, and its user base continues to grow in high-margin markets like the U.S. and Europe.

In the end, Pinterest’s stumble to $25 may have been the market’s way of pricing in short-term noise while overlooking long-term potential. For investors willing to look past the volatility, the setup is compelling: a company with a proven user base, a clear AI strategy, and a valuation that leaves room for error. The question now isn’t whether Pinterest can return to $30—it’s whether it can soar beyond it.

Conclusion: Pinterest’s stock may have lost its luster at $25, but the fundamentals suggest it’s primed for a comeback. With user growth at record levels, AI initiatives driving engagement, and a valuation that’s historically undemanding, the company is positioned to capitalize on its strengths. The upcoming Q1 earnings report on May 8 will be a critical test, but the data so far hints at a story of resilience—and one that could reward patience with a meaningful rebound. At this price, the risk-reward calculus tilts firmly in favor of the bulls.