Is Pinterest a Buy After a Billionaire Activist Pours $1 Billion Into the Stock?

Pinterest (NYSE: PINS) recently got a huge vote of confidence after activist investor Elliott Investment Management, led by billionaire investor Paul Singer, announced that it would add $1 billion to its stake in the company through a share repurchase plan.

Elliott will purchase $1 billion in convertible senior notes, which Pinterest will then use the proceeds from to repurchase $1 billion worth of its shares through an accelerated share repurchase (ASR) agreement. Elliott's notes will be convertible into stock at $22.72 per share, which is a 30% premium to the stock's price before the announcement. The notes will also pay out 1.75% a year in interest and mature in 2031.

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In addition to the ASR, Pinterest plans to buy back another $500 million in shares under a trading plan. In total, the company's board increased its share repurchase authorization to $3.5 billion.

Before its latest investment, Elliott already had nearly $725 million invested in Pinterest, as of the end of the fourth quarter. Excluding exchange-traded funds (ETFs), the stock was its fifth-largest holding. While known as an activist investor, the company appears to continue to support current CEO Bill Ready and the strategy he has embarked on at Pinterest.

Should investors follow Elliott into Pinterest?

Perhaps I'm in the minority with Elliott, but I actually think Bill Ready has done a great job at Pinterest. He has transformed the company from an online vision board into an online shopping discovery destination. He has fully embraced artificial intelligence (AI) to make the platform much more functional, with features like multimodal search, personalized curation, and an AI shopping assistant. Users can also now purchase most items they see without having to leave Pinterest's platform.

The company has also incorporated AI into its Pinterest Performance+ ad suite to help advertisers with bidding, budgeting, and creative to help better target users and improve conversion. Its AI-powered ROAS (return on ad spend) bidding feature, meanwhile, can help advertisers predict when users are likely ready to make big purchases, helping them bid accordingly.

Despite these improvements, Pinterest's stock has struggled. The company is much more tied to large brands than small and medium-sized retailers like Meta Platforms, and as such, its growth has lagged. Given its site, it also has considerable ties to home décor and furnishing, which is an industry that has struggled following the pull-forward in demand from the pandemic. However, Pinterest is still seeing solid revenue growth, including 14% in Q4, and it has been making big strides in international markets, where most of its users reside.

Trading at a forward price-to-earnings ratio (P/E) of about 12.5 times based on 2026 analyst estimates and below 10 times based on 2027 estimates, the stock is super cheap with the company still growing its revenue and earnings at a double-digit clip in a tough environment. That makes the stock a buy in my view.

Geoffrey Seiler has positions in Meta Platforms and Pinterest. The Motley Fool has positions in and recommends Meta Platforms and Pinterest. The Motley Fool has a disclosure policy.