Does Pinterest’s Strengthening Ad and Ecommerce Strategy Signal Upside for Investors?
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Wondering if Pinterest is quietly turning into a bargain while everyone is distracted by flashier tech names? This breakdown will help you decide whether the current price still offers upside, or if most of the value is already on the table.
Over the last week Pinterest has edged up about 1.0%, adding to a modest 2.9% gain over the past month, but that comes after a rough patch with the stock still down 14.2% year to date and 11.0% over the last year.
Recent headlines have focused on Pinterest sharpening its ad tools and e commerce integrations, as management leans into shoppable content and better monetization of its user base. On top of that, partnerships with major retailers and ongoing product upgrades have reinforced the narrative that this is evolving from a simple image board into a more commercial, performance driven platform.
Despite the mixed share price history, our valuation framework currently gives Pinterest a 6/6 valuation score, suggesting it screens as undervalued across every one of our checks. Next we will unpack what that actually means through different valuation lenses, and then circle back at the end with a more intuitive way to think about what the market is really pricing in.
A Discounted Cash Flow model estimates what a business is worth today by projecting the cash it can generate in the future and then discounting those cash flows back to their value in $ today.
For Pinterest, the latest twelve month Free Cash Flow is about $1.13 billion. Analysts and internal estimates expect this to rise steadily, with projections pointing to roughly $1.91 billion in Free Cash Flow by 2029 and continuing to grow into the 2030s. Early years are based on analyst forecasts, while later years are extrapolated from those trends by Simply Wall St using a 2 Stage Free Cash Flow to Equity model.
When all those future cash flows are discounted back, the model arrives at an intrinsic value of about $51.23 per share. That implies the stock is trading at roughly a 48.8% discount to its DCF based fair value, indicating potential upside if these cash flow assumptions hold.
For profitable companies like Pinterest, the price to earnings multiple is a useful way to gauge how much investors are paying for each dollar of current profits. A higher PE can be justified for businesses with stronger growth prospects and lower perceived risk, while slower growing or riskier companies typically trade on lower multiples.
Pinterest currently trades on a PE of about 8.92x, which is well below both the Interactive Media and Services industry average of roughly 16.66x and an even richer peer group average of around 66.84x. On the surface, that big discount suggests the market is either skeptical about the durability of earnings or is simply not willing to pay up yet.
To refine this, Simply Wall St uses a proprietary “Fair Ratio” of 14.51x, which estimates the PE Pinterest should trade on after factoring in its earnings growth outlook, risk profile, profit margins, industry positioning and market cap. This is more informative than a blunt comparison with peers or the sector because it adjusts for Pinterest’s specific strengths and weaknesses rather than assuming it deserves the same rating as very different businesses. With the actual PE at 8.92x versus a Fair Ratio of 14.51x, the shares still screen as undervalued on this lens.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to attach your own story about a company to the numbers behind it, including what you think its fair value should be and how revenue, earnings and margins might evolve over time. A Narrative connects three pieces together: the business story, a quantitative forecast, and a resulting fair value estimate, so you can see clearly why a particular price target makes sense instead of relying on a single headline number. On Simply Wall St, Narratives are an easy to use tool on the Community page, where millions of investors can browse, compare and build their own views of companies like Pinterest. Once you have a Narrative, the platform automatically compares your Fair Value to the current share price to help you interpret whether the stock looks like a buy, hold or sell, and then keeps that view current by dynamically updating when new earnings, news or guidance land. For example, one Pinterest Narrative might see fair value near $43 based on moderate growth and margins, while another places that closer to $93 with more aggressive assumptions, and your conviction will naturally sit somewhere between those extremes.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include PINS.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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