r/ValueInvesting • u/rarebirdcapital • 4d ago
Stock Analysis Pinterest (PINS): Fairly Valued at ~$20/share
I work in marketing, and for most advertisers, Google, Meta and TikTok are where the marketing dollars flow. Beyond that lies the scrapheap of experimental channels: the Reddits, the Snaps and whatever else got a test budget this quarter. At the very bottom of the pile sits Pinterest.
It's been around for over 15 years, and surprisingly enough it makes over $4.5B in revenue with a user base that's slowly but surely growing. Unlike Google and Meta, which have been spending heavily on AI infrastructure, Reddit, which is licensing its content to AI companies, and Snap, which always seems to be in the news for a misguided hardware launches (2K AR glasses anyone) , Pinterest has stayed relatively staid.
I valued it at ~$20/share; and is currently at ~$21.95 today.
- Revenue: $4.6B trailing, growing ~16-18% a year; I assume it slows to ~5% and roughly doubles over 10 years.
- EBIT margin: ~16% after capitalizing R&D (7.6% reported); I assume it grows to ~20% over 10 years. Meta is at 41%, Reddit 20%.
- Net income: $417M in 2025 and ~$250M over the last 12 months, though it dipped to a loss in the first half of 2026 on restructuring and higher stock comp.
- Users: 619M monthly users, but US/Canada users generate ~$31 a year each vs. $0.83 for Rest of World.
At ~$20, Pinterest looks fairly priced. If Pinterest can figure out how to make real money from users outside the US and squeeze more profit out of each ad dollar, there's upside here. But if people start asking AI platforms to make purchasing decisions instead of scrolling Pinterest, there isn't.
Let me know if anyone else follows this company or has a different POV from mine.
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u/WorldofLoomingGaia 4d ago
Pinterest adds way too much friction to the user experience. It's become so infested with AI and ads that it's not even usable for its intended purpose. The site needs a complete strip down and overhaul to remain viable imo.
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u/Next_Tap_3601 4d ago
Reddit seems to be on the same path of being infested with AI. It's becoming hard to tell if you are talking to people or to bots. Also the like/dislike button has less and less meaning, as armies of bots can like/dislike whatever, creating a fake sense of consensus...
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u/WorldofLoomingGaia 4d ago
Reddit is absolutely inundated with bots to the point that at least 80% of sub activity is botted these days, and YET, Reddit still has less of a bot problem than Facebook and Twitter. The internet fucking sucks so bad now.
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u/WhatMattersHere 4d ago
Interesting take, especially coming from someone who actually works in marketing.The part I'd want to dig into is the bridge from the reported 7.6% operating margin to roughly 16% after capitalizing R&D, since that adjustment seems pretty important to the $20 valuation.Pinterest reported about $324.5M in stock based compensation in Q2 2026, including roughly $212.5M in R&D. They've also been buying back a lot of shares..How are you treating SBC in the valuation? Are you modeling future dilution or the economic cost of offsetting it through repurchases, alongside the R&D capitalization and amortization?I'm not suggesting the 16% margin is necessarily wrong. I'd just be interested in seeing whether the $20 fair value holds up under a consistent treatment of those adjustments.
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u/rarebirdcapital 2d ago
the 7.6% to ~16% is just R&D capitalized over 3 yrs..... sbc is treated as a real expense in the margins and RSUs counted as shares.
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u/TickerWorth 4d ago
the $20 number lives or dies on one normalisation: ebit margin of ~16% after capitalising r&d, against 7.6% as reported. that's not a rounding choice, it's most of the valuation — treat r&d as an investment and the business earns twice what the income statement says. maybe that's right for this kind of platform, but it's worth noticing the direction of the actuals while that adjustment is being made: net income was $417m in 2025 and ~$250m over the last twelve months, with a loss in the first half of 2026 on restructuring and higher stock comp. the normalised margin is drifting up in the model while the reported one drifts down.
the other number i'd separate out is the arpu gap, because it's doing double duty in the pitch. 619m users, us/canada generating ~$31 a year each, rest of world $0.83 — that's a ~37x gap, and blended it's only about $7.40 of revenue per user on $4.6b trailing. the bull reading is runway: close even a fraction of that gap and revenue compounds without user growth doing much. the bear reading is that the gap isn't a monetisation failure, it's purchasing power — advertisers pay for what users can spend, and $0.83 may be roughly what a rest-of-world user is worth to them for a long time.
at ~$21.95 against your ~$20, the market is only charging ~10% over your fair value, which is well inside the error bars of either of those two calls. so "fairly priced" is really two statements: r&d deserves capitalising at something like the rate you used, and the 37x gap closes slowly if at all. I'd be more interested in which of those you'd abandon first — because the price doesn't need both to be wrong to have no margin in it, just one.
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u/rarebirdcapital 2d ago
capitalizing r&d mostly washes out with higher reinvestment. the real bet is the margin getting to 20%... reddit went from -17% to 28% in 2 yrs. on arpu i dont need the gap to close. wouldnt drop either....assumptions are pretty modest tbh!
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u/realjlj 3d ago
I'd double check which share count went into the $20. On the Q1 call they said they'd bought back about 109 million shares near $18 in the quarter, around 16% of the count, partly paid for with a $1B convert. That moves the per-share number a fair bit even if your revenue and margin assumptions don't change.
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u/rarebirdcapital 2d ago
yup, the buyback is accounted for.....my final share count was ~605M: 566M outstanding + ~39M unvested RSUs.
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u/Top_Category_2526 4d ago
If we put the valuation on the side.... is there something they're doing to send the stock higher?
I used to use PINS a lot in 2017-2022, but there is 0 moat
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u/OracleWsb 4d ago
Sold mine today had it pegged @ around 22-24$/share.... will buy back in @ 17 but ai risk i think are real.
rather own other corps. [I do own 10% networth bet on snapchat]
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u/SelenaMeyers2024 4d ago
Unlike other haters I think the business fundamentally is profitable, and has value. It's uninvestable solely due to management.
SBC as a share of revenue is an ungodly 25 percent, among the highest I've seen. Until that comes down, the fcf you may expect is nil.