Wow! It’s not been a good week for Pinterest (NYSE:PINS) stock. The stock fell 19% in after-market trading on Tuesday (4 November) and opened around 21% down a next day.
The sell-off followed the company’s slightly disappointing third-quarter results coupled with below-consensus guidance for Q4. The social media firm posted earnings of $0.38 per share — up from $0.32 a year ago, but around $0.04 shy of expectations.
On a brighter note, adjusted EBITDA jumped 24% year-on-year to $306.1m, coming in $9 million ahead of forecasts. That pushed its adjusted EBITDA margin up to 29%, a 200-basis-point improvement from last year and comfortably above analysts’ projections.
Growth was driven by a surge in user activity. Monthly active users climbed 30%, while the average revenue per user ticked 5% higher. Together, that powered a 17% rise in total revenue to $1.05bn. That was bang in line with expectations.
Pinterest also showed strong cash generation, with free cash flow up 30% to $318.4m.
The concern
The primary concern for Pinterest lies in the existential risk posed by the rise of artificial intelligence (AI)-driven chatbots and their broader impact on the digital advertising and discovery ecosystem.
As advertisers increasingly turn to conversational models and generative tools (instead of traditional social platforms), Pinterest’s model — built around visual discovery and user-driven intent — may face erosion of its relevance.
This narrative compounds pre-existing concerns about losing ground to larger social media companies, which offer broader reaches and effective marketing operations.
My take
Personally, I believe the Pinterest platform and business model will prove resilient. I don’t typically make forecasts like that but I’m a firm believer in the power of discovery… and nobody does that better than Pinterest.
And I think many other people — not necessarily investors — feel the same way. In the third quarter, monthly active users hit 600m, up 63m year on year.
And then, when it comes to the stock, it simply looks undervalued. It’s now trading at 14.8 times forward earnings. Moving forward to 2026, that figure falls to just 11.8 times. These are huge discounts to the technology sector average.
What’s more, Pinterest has a really strong balance sheet. It has a net cash position of around $2.7bn, which is huge considering the market-cap’s currently sitting around $17bn. Adjusting the price-to-earnings ratio for net cash would show an even bigger discount to the industry average.
And while I except this is by no means a perfect company, there are bundles of opportunities within its relative underperformance. For example, in Q3, it registered average revenue per user (ARPU) of $1.78. That’s incredibly lower than peers like Meta.
With that in mind, I like to think there’s scope for the business to improve monetisation further in the coming years.
In short, I was a bull on Pinterest when it traded in around $25 a share in April and May. It surged, but has gone on to disappoint. We’re back down around $25 a share, but this time with a less exciting earnings outlook.
Nonetheless, I still think it’s worth considering. And while I’m sure analysts will pair back their forecasts too, the stock currently trades 65% below the share price target.
