- Investors may be wondering whether Pinterest at US$18.25 is starting to look like value, or whether it is still pricing in a lot of hope.
- The stock has moved 1.3% over the last 7 days, while the 30-day return is an 8.8% decline and the return year to date is a 31.3% decline. This adds to a 28.1% decline over 1 year and a 34.7% decline over 3 years.
- These price moves sit against a backdrop of ongoing interest in social media platforms and their ability to convert user engagement into reliable cash flows. Recent news coverage has focused on how platforms like Pinterest position themselves against larger peers, and how investors weigh long term monetization potential against the share price history.
- Simply Wall St currently gives Pinterest a valuation score of 3 out of 6. The rest of this article will break down what that means across different valuation methods and then outline a more complete way to think about value at the end.
Find out why Pinterest's -28.1% return over the last year is lagging behind its peers.
Approach 1: Pinterest Discounted Cash Flow (DCF) Analysis
The Discounted Cash Flow model estimates what a business might be worth today by projecting its future cash flows and discounting them back to a present value.
For Pinterest, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $1.26b. Analysts provide explicit forecasts for several years, and then Simply Wall St extrapolates further out, with projected free cash flow of $2.73b in 2035, all in $.
Bringing these projected cash flows back to today gives an estimated intrinsic value of US$60.46 per share. Compared with the current share price of US$18.25, the DCF output suggests Pinterest is 69.8% undervalued on this model.
DCF models are sensitive to assumptions, but on these inputs the gap between price and estimated value is wide.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Pinterest is undervalued by 69.8%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: Pinterest Price vs Earnings
For a profitable company, the P/E ratio is a useful way to connect what you pay for the stock with the earnings it currently generates. It gives you a quick sense of how many years of current earnings are being reflected in the share price.
What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk typically align with a lower multiple.
Pinterest currently trades on a P/E of 28.1x. That sits above the Interactive Media and Services industry average of 14.3x, but below the peer group average of 43.3x. To refine this further, Simply Wall St uses a proprietary “Fair Ratio” for Pinterest of 22.1x. This Fair Ratio reflects factors like earnings growth, profit margins, industry, market cap and company specific risks, which makes it more tailored than a simple comparison against peers or the industry.
Comparing the current 28.1x P/E to the 22.1x Fair Ratio suggests Pinterest is trading above what the model views as a balanced level.
Result: OVERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.
Upgrade Your Decision Making: Choose your Pinterest Narrative
Earlier it was mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives, which combine a clear story about Pinterest with explicit assumptions for future revenue, earnings, margins and fair value. You can then keep that view updated as news and results arrive, so you can compare your Fair Value to the current US$18.25 price and see where you sit between, for example, a higher conviction view that Pinterest is worth about US$42.63 per share and a more cautious view closer to US$15.40 per share. All of this is laid out on the Community page where millions of investors share their own Pinterest Narrative.
For Pinterest however we will make it really easy for you with previews of two leading Pinterest Narratives:
These show how different investors can look at the same company, use the same facts, and still land in very different places on value and risk.
Fair value in this narrative: US$42.63
Implied discount to that fair value at US$18.25: 57.2% undervalued
Assumed annual revenue growth: 11%
- Sees Pinterest growing revenue and profitability on the back of product development, better monetization tools and higher interest from advertisers targeting intent driven users.
- Assumes revenue rises from about US$3.1b to between US$5.5b and US$7.2b by 2029, with net margins expanding to the high teens or low twenties and EPS moving into a US$2.00 to US$3.10 range.
- Applies a future P/E of 25x, giving a fair value of US$42.63 and framing Pinterest as an opportunity where the current price sits well below that central estimate.
Fair value in this narrative: US$15.40
Implied premium to that fair value at US$18.25: 18.5% overvalued
Assumed annual revenue growth: 9.6%
- Starts from the more cautious end of analyst assumptions, tying fair value to a lower price target and a view that Pinterest faces pressure on ad pricing, margins and execution.
- Builds in revenue growth of 9.60% a year, margin compression from current levels and a future P/E of 26.46x, all discounted at 8.27% to arrive at a fair value of US$15.40.
- Highlights risks such as softer ad markets in key sectors, reliance on lower funnel ad tools and the possibility that growth in newer verticals and regions does not live up to expectations.
Together, these Narratives bracket a wide valuation range and make it clear that your view on Pinterest will depend on how confident you are about growth, margins and what multiple the market could be willing to pay over time. If you want to see how other investors connect their story, numbers and fair value for Pinterest, See what the community is saying about Pinterest.
Do you think there's more to the story for Pinterest? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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