Pinterest (NYSE:PINS) shares are up 22.7% over the past month. Sadly, that doesn’t mean £10,000 invested then would be worth £12,270. That’s because the pound has appreciated against the dollar, so the actually figure would be a little less. Despite this impressive performance, I believe the stock can go higher still. Let’s take a closer look.
How Pinterest makes money
Pinterest’s business model is driven almost entirely by digital advertising. The platform serves highly targeted, performance-based ads to users. The site leverages their engagement, interests, and search behaviours.
The North America region remains the dominant geography, contributing about 78% of total sales despite accounting for less than a fifth of the user base. This highlights a significant international monetisation gap, and suggests there’s substantial runway if Pinterest can close the ARPU (Average Revenue Per User) gap outside the US.
In Q4 2024, global ARPU rose 6% year-on-year to $2.12, with North America seeing even stronger gains. This ARPU growth’s critical, as it directly reflects Pinterest’s ability to convert user engagement into revenue.
Positive developments
Recent momentum’s been driven by a series of artificial intelligence (AI)-led innovations. Pinterest’s new AI-powered advertising tools have made campaign setup and creative generation far more efficient for advertisers, reportedly cutting manual work in half and reducing cost-per-acquisition by 20%.
Improvements to the recommendation engine have also paid off, with a 30-fold expansion in the AI’s ‘context window‘ allowing for deeper understanding of user behaviour. This led to a measurable increase in outbound clicks and overall engagement. These are both key metrics for advertisers.
The financials show these efforts are working. In Q4 2024, Pinterest posted its fastest revenue growth in over a year, up nearly 18% year-on-year to $1.15bn. Pinterest’s Q1 2025 results provide further evidence that the company’s momentum isn’t just a one-off, but part of a sustained growth trajectory.
In the first quarter, it generated $855m in revenue, up 16% year-on-year, with growth accelerating to 17% on a constant currency basis. This performance was driven by continued expansion of its user base, which reached a record 570m global monthly active users — a 10% increase from the prior year.
What’s more, the EBITDA margin increased 300 basis points to 20%.
The bottom line
A key risk for Pinterest is its reliance on digital advertising. This is sensitive to economic downturns and shifts in advertiser budgets. Additionally, intensifying competition and regulatory scrutiny around data privacy could impact user growth and monetisation efforts.
Nonetheless, I’m buoyed by the trajectory and find the valuation very attractive. The company trades at 17.7 times forward earnings and has a price-to-earnings-to-growth (PEG) ratio of 0.53. Now as much as I love the PEG ratio, I believe this is slightly skewed by a singular prediction at the end of the forecasting period. Discounting that one prediction, the stock still looks very cheap to me.
I recently bought Pinterest shares and may buy more.
