In the social media space, Pinterest, Inc. (NYSE:PINS) has remained one of the key players, demonstrating strong user growth and engagement enhancements. The California-based company operates as a visual search and discovery platform to allow users to find ideas, search, save, and shop, and to offer various advertising products.
The company’s users are expanding, and engagement continues to grow globally and in UCAN. Pinterest, Inc. (NYSE:PINS) ended Q1 FY2026 with 631 million global monthly active users (MAUs), up 11%. The company’s global revenue also climbed by 18% to $1.008 billion in Q1. While the overall ad impressions grew 24%, the ad pricing reduced by 5% YoY. Much of this decline comes from tougher YoY comparisons after the company significantly expanded ad monetization in previously under-monetized markets. Additionally, the company delivered an above-consensus adjusted EBITDA margin of 20%, thanks to higher revenue.
As outlined by management, the user and engagement strength has remained the company’s standout achievement in its transformation over the past few years. In fact, the first quarter marks the 11th consecutive quarter of record-high users. The company has also achieved double-digit user growth in 10 straight quarters. That said, Pinterest, Inc. (NYSE:PINS) has positioned itself as an AI-driven shopping assistant.
What’s Behind the Strong Engagement
The company’s multi-year investments in AI and improvements in personalization and curation have ultimately led to robust engagement and user growth. Management notes that a large chunk of the company’s user base comes from Gen Z, who now represent the largest and fastest-growing demographic. Not only are they using Pinterest to shop, but they are also valuing the very private nature of the app to enhance their well-being.
Although the company’s user and engagement story remains strong, Pinterest trades at a steep discount, suggesting investors remain skeptical about its ability to monetize growth. Pinterest, Inc. (NYSE:PINS) has a forward P/E of 13.30 in contrast to the industry’s forward P/E of 29.56. The stock has dipped by 36% in the past year. So, one wonders: is the market underappreciating the stock’s true valuation?
Why Investors Are Still Hesitant
Three concerns are keeping Pinterest’s valuation depressed: weaker ad pricing, rising AI competition, and uncertainty around advertiser spending. While demand from small- and mid-sized businesses is strengthening for Pinterest, Inc. (NYSE:PINS), it remains exposed to tariffs and overall macroeconomic uncertainty.
Similarly, the company faces competition from deep-pocketed peers, including Instagram and Facebook, as advertisers have become more cautious with spending amid the AI rise. It is also worth noting that Pinterest isn’t alone in its AI acceleration; its rivals are also heavily investing in AI to boost growth.
Despite these, the real health of the company is improving. Just a month ago, Pinterest, Inc. (NYSE:PINS) signed what is known to be its biggest deal with Amazon. This involves Pinterest paying Amazon Web Services $4 billion for cloud services through 2031 to advance its AI projects. The company’s AI initiatives, by launching upgrades to its Performance+ ad suite, paint a positive big picture, one that the market may currently be overlooking.
The Investment Thesis
Overall, the Street is divided on Pinterest, Inc. (NYSE:PINS), with half of the analysts bullish on the stock and the remaining 50% appearing neutral. According to Insider Monkey’s database, 49 hedge funds held Pinterest shares at the end of Q1, in contrast to 53 funds in the previous quarter.
Those in favour of the stock highlight the company’s monthly active users and average revenue per user. When Wells Fargo lifted the price target on the company to $30 from $28 and maintained an Overweight rating on July 7, it said that Q2 advertising checks have yet to show a meaningful improvement in user time spent. The firm expects the company to deliver a solid quarterly performance, but does not view it as an inflection point.
Skeptics, meanwhile, argue that Pinterest, Inc. (NYSE:PINS) has consistently lagged on returns. Where the S&P 500 delivered 64.89% in the past three years, Pinterest negatively returned 20.41%. The company’s ROE and profit margin of 8.87% and 7.64%, respectively, appear quite moderate considering the levels achieved by peers like Meta Platforms (META) and Spotify (SPOT). Moreover, if the ad pricing continues to weaken and concerns over advertisers demand uncertainty keep on mounting, the company’s revenue growth and profit margins could come under pressure.
Investors must consider the risk that monetization improvements from Performance+ and other AI tools may take longer to significantly contribute to consistent profit growth. The market is currently valuing Pinterest like a mature social platform, but its AI-powered shopping transformation could justify a higher multiple if it is successful in monetization.
While we acknowledge the risk and potential of PINS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PINS and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
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