Twelve NYSE-listed stocks hit 52-week highs Tuesday in pre-market trading. One of them was Pinterest (PINS), the social media app that gives users visual ideas for recipes, home and style inspiration, and much more. 

As I said, Pinterest hit a 52-week high of $40.97 in Tuesday's pre-market trading, the 30th time to do so in the past 12 months. On a side note, the 12 names are virtually all excellent companies in their own right. 

Slowly but surely, CEO Bill Ready is transforming Pinterest into a positive light for social media and, in the process, boosting its revenue generation possibilities. That’s great news for long-time investors who probably wondered in 2022 if its share price would ever break out of its doldrums. 

It has to such an extent that some investors might feel it’s too late to buy PINS stock. I’m here to say it’s not too late. Here’s why. 

Pinterest’s Fundamentals Are Improving

Ready has been CEO since June 2022. He took over as chief executive from co-founder Ben Silbermann, who moved upstairs to Executive Chairman. Ready joined the company from Google, where he was President of Commerce, Payments & Next Billion Users. Before that, he held executive roles at PayPal (PYPL). 

When he took over the role, Pinterest had 433 million global monthly active users (MAUs). It reports Q4 2023 results on Thursday after the markets close. I expect them to be reasonably robust. In Q3 2023, it had global MAUs of 482 million, 11.3% higher than when Ready started at Pinterest 19 months ago. 

You might not think an 11.3% increase is anything to write home about, but Elon Musk would take that increase over the same period for X. In the year since Musk acquired Twitter and changed the name to X, the social media platform lost 15% of its MAUs, so all things are relative. 

In Q2 2022, it had revenue of $666 million and adjusted EBITDA of $92 million. In Q3 2023, it was $763 million, 14.6% higher than Q2 2022, with $185 million in adjusted EBITDA, more than double. Its adjusted EBITDA margin in Q3 2023 was 24%, more than double the 11% margin a year earlier. 

More importantly, it generated a GAAP profit of $6.7 million in Q3 2023, up from a $65.2 million loss in Q3 2022. It’s one of only three profitable quarters over the past 24 months. 

Single-Digit Growth in the U.S. and Canada Is More Than Okay

Pinterest’s revenue in Q3 2023 in the U.S. and Canada was 81% overall. Yet, its U.S. and Canada MAUs were only 20% overall. There remains a disconnect between its U.S./Canada business and its other two geographic regions. 

Europe’s revenue in Q3 2023 was $114 million, 33% higher than a year earlier, accounting for 15% of Pinterest’s revenue in the quarter. However, its MAUs were 128 million, or 27% overall. The Rest of World region had $31 million in revenue, 29% higher year-over-year, accounting for just 4% overall, despite having 54% of the global MAUs. 

Have you ever heard of the 80/20 principle? It’s the adage that 20% of the people generate 80% of the revenue. Or, in this case, 20% of the MAUs are generating 80% of the revenue. 

Currently, Pinterest is the classic case of the cream rising to the crop. However, it’s slowly changing. The disconnect will gradually disappear if the company can continue to grow the ARPU (average revenue per user) for its U.S. and Canada MAUs by mid-single-digits each quarter while increasing ARPU by double digits for Europe and the Rest of World. 

Analysts are liking the progress Ready is making on the financial front. 

The 30 analysts covering PINS stock rate it a Moderate Buy (4.40 out of 5). Three months ago, it was also a Moderate Buy with a score of 4.20 out of 5.  

The Positive Business Model

One of the things that always attracted me to Pinterest is the positive nature of the Pinterest experience. No trolls are screaming at you because you like how a log cabin looks. Social media has become so hateful that it’s no fun to use, especially when all the research says it’s harmful to your well-being. 

On Feb. 1, the Financial Times’ Hannah Murphy interviewed Bill Ready about how he intends to make social media less toxic. He uses a metaphor to explain how most social media platforms’ algorithms and AI are designed to maximize a user’s view time, taking away from an enjoyable experience. 

“The metaphor I use for this is that it’s like driving down the road and approaching a car crash up ahead. We all know you shouldn’t look, right? But everybody peeks. With algorithmically derived feeds, the AI says: ‘You looked, [so] I should show you another car crash. And you looked at that one, too. [So] I should show you another car crash. You looked at that one, too . . . ’ Until, eventually, your feed is filled with nothing but car crashes. That is what has happened with social media,” Ready told Murphy. 

“But, if you ask somebody after they saw the car crash, ‘You want to see another one of those?’ The vast majority of people will say, ‘Goodness, no, that was terrible.’”

Arguably, the late Charlie Munger’s best piece of advice was that you should get toxic people out of your life as quickly as possible. My guess is he wouldn’t have approved of most social media platforms, especially X, because of their toxicity. 

Ready says that Pinterest doesn’t allow political advertisements on its platform. I commend them for rejecting this revenue. It does nothing for the future of Pinterest.

PINS stock might be trading at or near a 52-week high, but its momentum should continue through 2024 as investors realize Facebook isn’t the only game in town.  

It’s definitely not too late to buy Pinterest stock.

 

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On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.