Pinterest Down 12.5% in Three Months: Should You Avoid PINS Stock?

Core Insights - Pinterest, Inc. (PINS) shares have declined 12.5% over the past three months, underperforming the Internet - Software sector's growth of 2.4% and the S&P 500's growth of 1% [1] - Despite this decline, Pinterest has outperformed Snap Inc. (SNAP), which fell 15.5%, but lagged behind Meta Platforms, Inc. (META), which decreased by 1.1% during the same period [3] Growth Catalysts - Pinterest is expanding into various end markets such as retail, consumer packaged goods, travel, financial services, and automotive to increase user engagement [4] - A recent collaboration with the WNBA team New York Liberty aims to bring exclusive content and experiences to the platform, tapping into the growing interest in women's basketball [4] - The company is focusing on improving operational rigor and utilizing advanced AI models to enhance relevancy and personalization, which is expected to yield long-term benefits [5] - The introduction of a visual search feature allows users to search using images, enhancing the discovery experience and likely boosting engagement [6] - Revenue growth is being driven by enhanced monetization opportunities, with international shopping ad revenues growing three times faster than overall revenue growth in those regions [7] Major Challenges - Pinterest relies heavily on advertising for revenue, making it vulnerable to changes in the advertising industry and economic downturns [8] - Although ad impressions grew by 49% in Q1, ad pricing declined by 22% year-over-year due to lower pricing in newly expanded international markets [8] - The company faces intense competition from larger media companies like Meta, Google, Snap, and TikTok, necessitating continuous investment in new tool development, which pressures margins [9] - Total costs and expenses increased to $890.5 million in Q1 from $794.4 million a year ago, with R&D expenses rising to $331.7 million from $280.3 million [9] Estimate Revision Trend - Earnings estimates for PINS for 2025 have decreased by 1.62% to $1.82, while estimates for 2026 have fallen by 2.3% to $2.12, indicating bearish sentiment regarding the stock's growth potential [11] Valuation Metrics - From a valuation perspective, Pinterest appears relatively cheaper compared to the industry, trading at a price/sales ratio of 4.8, lower than the industry average of 5.44 and below its own mean of 5.21 [14] Overall Outlook - Pinterest is experiencing strong monthly active user growth and is emphasizing shoppability and monetization potential, supported by advanced AI tools [16] - However, macroeconomic factors, geopolitical volatility, and tariff changes are impacting ad spend, while rising operating expenses and stiff competition pose challenges [17]