Why has Pinterest stock become such a dog?

Linde Equity Fund analyst Teal Linde said Pinterest (Pinterest Stock Quote, Chart, News, Analysts, Financials NYSE:PINS) remains an overlooked growth opportunity despite recent volatility in the shares, citing improving fundamentals and an attractive valuation following the stock’s latest pullback.

Speaking on BNN Bloomberg’s Market Watch on Dec. 15, Linde noted that Pinterest shares sold off sharply after its most recent quarterly results, a pattern he said is not unusual for the company.

“If you look at the last twenty-one quarters, Pinterest stock has had an average move of about 14% following earnings, with swings as high as plus 36%and as much as an 18% decline,” he said. “This time, the stock fell about 17% on what was really just a slight miss.”

Linde said the selloff has left the stock trading at a compelling level relative to its growth profile. Pinterest is expected to grow revenue and earnings by roughly 15% next year, while trading at about 13.5 times forward earnings.

“Generally speaking, when you have a company growing in the mid-teens and the valuation is also in the mid-teens, that usually turns out to have been a buying opportunity,” he said.

He pointed to significant operational changes since Pinterest shares peaked near US$89 in 2021 and subsequently fell into the mid-$20 range. New management, installed around 2022, has focused on improving monetization while enhancing the user experience.

“They’re really leveraging AI to improve the user experience and make ads more effective,” Linde said, adding that Pinterest has increased ad load while still seeing rising user satisfaction scores.

He also highlighted Pinterest’s push into new advertising formats, including connected TV, following its acquisition of TV Scientific, as well as a renewed emphasis on commerce.

“They’re moving beyond just inspiration,” Linde said. “They want people to be able to buy what they discover on the platform, which was actually part of the original vision for Pinterest.”

Pinterest shares have fallen 15.1% over the past 12 months and are down 60.5% over five years. Of the analysts covering the stock, 33 rate it a “Buy,” nine a “Hold,” and one a “Sell,” with an average price target of US$36.56.

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