Pinterest's (PINS) Earnings Momentum and Valuation Appeal: A Case for Long-Term Buy Despite Zacks Rank #4 (Sell)

The debate over Pinterest's (PINS) investment potential hinges on a critical tension: its attractive valuation metrics and forward-looking earnings growth versus the bearish Zacks Rank #4 (Sell). While the Zacks rating underscores near-term earnings pessimism, a deeper analysis of Pinterest's financial fundamentals and market positioning suggests that its valuation appeal may justify a long-term buy case for investors with a strategic horizon.

Earnings Momentum: A Foundation for Growth

Pinterest's forward-looking earnings per share (EPS) growth trajectory appears robust. According to data from StockAnalysis, the company's PEG ratio of 0.80 implies an expected EPS growth rate of approximately 18.2% for 2025, calculated by dividing its forward P/E ratio of 14.55 by the PEG ratio. This aligns closely with the five-year EPS growth forecast of 15.41%, as noted by ChartMill. Such growth is underpinned by Pinterest's AI-driven innovations, including enhanced visual search and personalization tools, which are expected to boost user engagement and ad performance.

Moreover, Pinterest's trailing P/E of 9.22 and forward P/E of 14.55 indicate that investors are paying a moderate premium for its earnings, far below the industry average of 28.76. According to Yahoo Finance, this suggests that the market is pricing in cautious optimism about Pinterest's ability to scale revenue while maintaining profitability.

Valuation Appeal: Undervalued Metrics and Historical Context

Pinterest's valuation metrics paint a compelling picture of undervaluation relative to both industry benchmarks and historical trends. Its Price-to-Earnings (P/E) ratio of 8.8x is significantly lower than the peer average of 71.7x and the industry average of 15.8x. This discount is even more striking when compared to the company's 6-year historical P/E average of 99.1, with the current ratio at 91% below that level.

The PEG ratio of 0.58 further reinforces this narrative, indicating that Pinterest is undervalued relative to its earnings growth potential compared to the industry average of 1.87. According to Yahoo Finance, this metric is particularly compelling. Additionally, Pinterest's forward price-to-sales (P/S) ratio of 3.66 is below the industry average of 4.87, suggesting that its revenue-generating capabilities are being undervalued by the market.

Zacks Rank #4 (Sell): A Cautionary Signal or Misaligned Sentiment?

The Zacks Rank #4 (Sell) is primarily driven by downward revisions to Pinterest's earnings estimates. Over the past 60 days, the 2025 consensus EPS estimate fell 8% to $1.62, while the 2026 estimate dropped 8.3% to $1.88. For the current quarter, the consensus EPS estimate of $0.68 reflects a 21.4% year-over-year increase but a 12.5% decline in the estimate over the last 30 days. These trends signal investor skepticism about Pinterest's ability to sustain earnings momentum in the near term.

However, the Zacks Value Style Score of D -indicating a premium valuation relative to peers-appears at odds with Pinterest's low P/E and P/S ratios. This discrepancy may stem from the Zacks model's emphasis on unconventional valuation metrics or its comparison to a broader peer set that includes overvalued companies. Notably, Pinterest's EV/EBITDA ratio has hit a 5-year low of -150.6x, a metric that could reflect temporary earnings volatility rather than intrinsic value.

Reconciling Valuation and Earnings Trends

The disconnect between Pinterest's valuation metrics and its Zacks Rank highlights a key question: Is the market overcorrecting for near-term risks, or is the Zacks model mispricing long-term potential? While the Zacks Rank prioritizes earnings estimate revisions, it does not fully account for Pinterest's structural advantages. For instance, the company's 600 million monthly active users-a 17% year-over-year increase- and AI-driven ad innovations position it to capture a larger share of the digital advertising market, which is projected to grow significantly in the coming years.

Furthermore, Pinterest's valuation appears to reflect a discount to its intrinsic value. A P/E of 8.8x is well below the estimated fair P/E of 16.7x, suggesting that the stock could rally if earnings growth meets or exceeds expectations. This creates a margin of safety for long-term investors who are willing to tolerate near-term volatility.

Conclusion: A Buy Case for the Long-Term

While the Zacks Rank #4 (Sell) serves as a cautionary signal for short-term investors, Pinterest's valuation metrics and forward-looking earnings growth present a compelling case for long-term buyers. The company's undervalued P/E, P/S, and PEG ratios, combined with its AI-driven growth initiatives, suggest that the market is underestimating its potential to scale revenue and earnings. Investors who believe in Pinterest's ability to execute on its strategic vision-particularly in leveraging AI to enhance user experience and ad effectiveness-may find the current discount to be an attractive entry point.

As always, investors should monitor earnings revisions and macroeconomic conditions, but the fundamental case for Pinterest remains intact for those with a multi-year horizon.