Investment Case Update: May 20, 2025
Market Capitalization: $21.8B
Enterprise Value: $19.4B
Price: $32.26 (5/20/25)
What the Company Does
Pinterest is a social media platform of purchase intent, targeting 570 million monthly active users (MAUs) with ads. Users browse content (aka “Pins”) to curate products and bring their ideas to life in 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 market through highly achievable growth levers of 1) improving user monetization, 2) a growing and increasingly engaged userbase, and 3) AI/Performance+ adoption. Partnerships with Amazon and Google 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 also working 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. Management’s decision to increase “shopability” on the platform by focusing on more lucrative lower-funnel ads (~85% of platform’s ads) is resonating with users, as evidenced by 66% of weekly Gen Z users (>40% of MAUs) citing Pinterest as one of the first services they use for shopping (vs. 54% in prior year). Meanwhile, MAUs and engagement levels continue to rise, reaching all-time highs in 2024, and yet PINS’ userbase only represents ~7% of the world population. The Performance+ product continues to impress, outperforming traditional campaigns in 80% of head-to-head tests, aided by its new return on ad spend bidding feature, which could attract increased allocations from smaller advertisers and further diversify PINS’ advertiser mix.
PINS 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 it progresses towards its medium-term target for low-30% Adjusted EBITDA margins (vs. 28% in ‘24). Despite tangible growth levers and robust profitability, shares trade at a forward (FY26) EV/EBITDA multiple of 13.0x, or a ~28% 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 $2.6B and no debt, management should have ample capacity to tap into its $1.7B share buyback program (~8% of market cap) while meeting the business’s relatively low reinvestment needs, and preserving some optionality for opportunistic M&A.