As of 3/5/25
Market Capitalization: $23.9B
Enterprise Value: $21.5B
Price: $35.20 (3/4)
What the Company Does
Pinterest is a social media platform that targets 553 million monthly active users (MAUs) with ads, as users browse content (aka “Pins”) to curate products and bring their ideas to life. The platform’s core use cases are women’s fashion, home décor, and food & drinks, with emerging use cases in men’s fashion, auto, and travel. Unlike other social media platforms, targeted ads on Pinterest represent highly relevant product ideas that blend in with the content the underlying user is actually seeking (e.g. new outfit). Therefore, Pinterest showing more ads to a user can actually lead to increasing engagement levels, creating a positive feedback loop that benefits users and advertisers. The Performance+ product allows digital advertisers to automate and optimize spending across their digital marketing campaigns on the platform.
Why We Own It
PINS is a differentiated social media platform with a massive runway for growth, as it looks to grow its <1% market share of the fast-growing >$600B global digital advertising market1 through a renewed strategic focus. Management’s decision to focus on more lucrative lower-funnel ads and enhancing “shopability” on the platform has delivered promising early results, as PINS more than doubled outbound clicks to retailers for four consecutive quarters before growing another 90% year-over-year (Y/Y) in 4Q24. Users are responding positively to the shift as well, as evidenced by 66% of weekly Gen Z users (>40% of Monthly Active Users (MAUs)) citing Pinterest as one of the first services they use for shopping (vs. 54% in prior year), along with MAUs and engagement levels reaching all-time highs in 4Q24. Third-party partnerships with Amazon and Google and the new Performance+ product are expected to further expand PINS’ addressable market by increasing international ad demand and lowering entry barriers for a wider range of advertisers. PINS is leveraging partnerships with digital ad resellers and Google Ads Manager to establish new advertiser relationships and improve monetization in international markets, which account for ~80% of PINS’ users but only ~25% of its revenue. Meanwhile, management cited a 20% reduction in cost per acquisition (CPA) for advertisers testing their Performance+ product, which could result in increased allocations from smaller advertisers and further diversify PINS’ advertiser mix.
Management also plans to gain operating leverage through AI-based efficiencies, diminished sales and marketing costs from scaling 3rd-party partnerships, and mid-teens revenue growth, as PINS progresses towards its medium-term target for low-30% Adjusted EBITDA margins (vs. 28% in 2024). Despite tangible growth levers and robust profitability, shares trade at a forward (FY25) EV/EBITDA multiple of 16.8x, or a ~35% discount to peers (RDDT, SNAP, META, GOOGL, TTD).
How Management Allocates Capital
Management’s top capital allocation priority is investing in product and technology innovation, or R&D, to support its rapidly scaling network and improve the user experience. With a net cash position of $2.5B and no debt, management should have ample capacity to tap into its $1.9B share buyback program (8% of market cap) while meeting the business’s relatively low reinvestment needs, and preserving some optionality for opportunistic mergers and acquisitions (M&A).