Pinterest Stock Surges. Will This Rally Finally Last?

Share prices of Pinterest (NYSE: PINS) soared after the social media company reported strong results on May 8. They got another boost a few days later on news of easing tensions in the U.S.-China trade war. Nonetheless, the stock still trades down about 21% over the past year, as of this writing.

The stock has shown rally-like signs in the past year, only for the rally to eventually sputter. This is the second time this year that the stock has risen by 15% or more at some point directly after it has reported earnings.

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Let's look at Pinterest's most recent results and guidance to see whether this rally can stick.

Image source: Getty Images

Pinterest's revenue momentum continues

Since taking the helm of Pinterest nearly three years ago, CEO Bill Ready has directed heavy investment in the business to make the platform shoppable so as to better monetize the online vision board's large, predominantly female user base. On the company's earnings call, Ready said these investments have made Pinterest a more resilient platform than in the past.

More recently, Pinterest has embraced artificial intelligence (AI) to help drive growth. The company plans to double down on visual search that uses its multimodal AI model trained on both image and text data. The goal is for the platform to better interpret user input and provide better personalized recommendations. This should lead to a better user experience.

In turn, a better user experience drives greater engagement and opens the door for more ad placements. More relevant ads, meanwhile, translate into higher click-through and conversion rates. Pinterest is also enabling advertisers to run full-funnel campaigns, which use ads to target users at every stage of the customer journey to help build brand awareness, drive interest, and ultimately encourage purchases. One of its key new solutions is Performance+, which integrates AI-powered advertiser tools and new bidding functionalities to help advertisers increase lower funnel conversions. The company said the solution is in the early days of a multi-year advertiser adoption.

The transformation of Pinterest's platform could be seen in its most recent quarterly results. The company reported a nice combination of increasing its average revenue per user (ARPU) and attracting more users to its platform.

Monthly active users (MAUs) climbed by 11% to 570 million, led by a 14% jump to 320 million "rest of world" users. U.S. and Canada MAUs grew by 4% to 102 million, while European users jumped by 5% to 148 million.

Its overall ARPU grew by 5% year over year to $1.52, but given the big disparity between regions, it's best to look at the metric on a regional basis. ARPU increased by 8% to $6.54 in the U.S. and Canada, while European ARPU soared by 17% to $1. "Rest of world" ARPU, meanwhile, surged 29% to $0.14.

Pinterest said it was successfully exporting its lower funnel (actual ad conversion) shopping playbook and increasing actionability in markets outside of the U.S. and Canada. It also noted that revenue from its catalog shopping ads format was up meaningfully in these regions. Better monetizing international markets has been a big focus for the company and remains an opportunity.

Overall revenue for Pinterest jumped 16% year over year to $855 million, ahead of the $847 million consensus as compiled by LSEG. U.S. and Canada revenue increased 12% to $663 million, while European revenue climbed 24% to $147 million. Revenue from its "rest of world" segment surged 49% to $45 million.

Turning to profitability, Pinterest saw its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jump 36% year over year to $172 million. Meanwhile, adjusted earnings per share rose by 35% to $0.23.

Looking ahead, Pinterest forecasts Q1 revenue to be between $960 million and $980 million, representing 12% to 15% growth year over year. The midpoint was solidly ahead of the $966 million analyst consensus.

The company said it is not immune to the macroenvironment and noted that tariffs have impacted spending from Asia-based e-commerce retailers in the U.S. However, it's also seen those Asian e-commerce companies shift spending to Europe and other regions.

Is Pinterest stock a buy?

While Pinterest's stock has had its ups and downs over the past year, there's little doubt the company has undergone a real transformation under CEO Bill Ready. Regardless of macro headwinds, Pinterest is now far better positioned than it was in the past. It has embraced technology in meaningful ways, making the platform more attractive to both users and advertisers. And the numbers speak for themselves.

Trading at a forward price-to-earnings (P/E) ratio of about 18 based on 2025 analyst estimates, Pinterest stock is also cheap.

Data by YCharts.

Between its valuation, the transformation the company has undergone, and the growth opportunities still in front of it, Pinterest looks like a stock to buy at current levels, even after its recent rally.

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