Parkev Tatevosian, CFA on $PINS (Nov 1, 2026)

Pinterest recorded revenue growth of 12% to reach $1.174 billion, and reached a historic peak of 661 million monthly active users by the end of the third quarter.

But things weren't entirely rosy, as the company also announced a 2% decrease in operating cash flow . Investors punished the stock , and shares fell by 7% sometime the day after the company announced its quarterly financial results.

Of course, I'm disappointed by that . I own Pinterest shares in my portfolio, and more importantly, I rank it as one of the top 10 stocks you can buy right now.

So, I am disappointed to see stocks underperforming not just this week and today, but throughout 2026.

What do I think about Pinterest now? Do I still think it's a buying opportunity? Do I still think it's one of the best stocks to buy? What am I going to do with my shares? Am I going to sell these shares? Am I going to add more to my portfolio?

Revenue growth has been strong for Pinterest, along with strong growth in the number of monthly active users. But in reality, Pinterest performed similarly to Meta in terms of year-on-year user growth, and better than Reddit in the critical user category , which includes those from North America, the United States, and Canada, who represent more profitable accounts that generate higher average revenue per user.

But Pinterest had to spend more to achieve these results. The company's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 11% year-on-year.

Cash flow from operations decreased by 2%, and free cash flow decreased by 6%.

Typically, when you see a company growing its revenue by 12%, you would expect to see its cash flow improve by at least 12%. In this case, the cash flow decreased. As a shareholder, I was excited to see the company add 4 million users from the United States and Canada .

That was a 4% increase. This is a saturated market. Pinterest's continued growth in this saturated market has been impressive,

Average revenue per user from the United States and Canada increased by 10% to $8.38. Average revenue per user in Europe is $1.21, and it has decreased this quarter. This is roughly equivalent to one-sixth of the average revenue per user from the United States and Canada.

For the rest of the world, it costs only 23 cents. That's 40 times less than what it generates from average user revenue in the United States and Canada .

Therefore, it can be argued that this is the most important category for user growth. They are achieving growth from this sector. In the long run, this bodes well for Pinterest investors.

The financial guidelines were also reasonable. For the fourth quarter, they expect revenues of around $1.45 billion, representing a 10% mid-quarter increase with adjusted earnings of around $558 million.

Therefore, this is a continuous growth in revenue, which is expected when moving from the third quarter to the fourth quarter, which is a seasonal quarter with higher revenues, and also higher profitability.

So, while revenues increased by 12%, their total costs and expenses also rose significantly to 1.143 billion, up from 990 million in the same period of the previous year. There were increases in almost every category, with the bulk of the increases resulting from the cost of revenue, research and development, and sales and marketing.

But I don't mind if these costs increase in research and development, sales and marketing. The increase in revenue costs indicates higher computing costs that the company has to pay, and this is a sign of the current era where artificial intelligence is driving increased costs in data center computing capacity .

In the field of research and development, the company has not shown, over the years, an ability to develop products and services. They were essentially relying on just one idea.

They haven't developed anything outside of their app that displays the images people save on their tablets, etc.

I would say that I would give credit to the management team for adapting to the privacy policy changes that Apple made around 2021-2022, which made it harder for social media companies to track user behavior, and also made ad targeting more difficult.

Pinterest made a good adjustment to those changes. So, this is something they handled well. This is one of the few instances where I can highlight something the management team did during a difficult situation and adapted to it effectively, and I have been following this company since 2019.

So, instances of developing new products and services have been rare and infrequent. Consequently, they did not gain a good reputation as effective managers of capital allocation. In fact, it's quite the opposite.

Shareholders and investors in the market as a whole are skeptical about research and development efforts, especially since this is the primary category in which the company pays equity-based compensation , which has increased significantly without showing tangible results.

So, this is a category where I don't mind the company spending money, but it has to show me results. You need to show me consistent results, not just one thing over a decade, and I don't see that from Pinterest.

You can see that increase in stock-based compensation continuing into the last quarter , rising to 292 million, up from 235 million in the same period last year, an increase of nearly 25%.

Another disappointment was that the company did not repurchase any Class A common stock during this quarter. They repurchased shares for tax purposes when issuing restricted stock units and granted restricted stock worth 100 million, but that was less than the amount they allocated last year.

When you have a declining stock price and an investor base that feels your stocks are undervalued, and you don't use your capital to buy back shares, that's a big surprise, especially considering they've already spent over $2 billion this year on share buybacks.

Does this indicate that the management team no longer feels that the stock is undervalued? This raises questions when you have a stock that is significantly undervalued , and investors worry that it may be a value trap rather than a valuable stock.

Therefore, Pinterest is now trading at a forward price-to-earnings ratio of only 7.8. This is close to the lowest price this stock has reached in several years. When you look at earnings growth and revenue growth, both exceed the price-to-earnings ratio, indicating that the PEG ratio is also very low.

I have also updated my assessment of Pinterest's discounted cash flows , and revised my estimates downwards once again . I would like to warn investors that my estimates for Pinterest throughout 2026 indicated a downward revision in almost every estimate I changed .

Therefore, the stock appeared undervalued , but performance continues to be weaker than expected. Now, I value the company at $30 per share. The current market price is $19. The stock appears to be undervalued by about 61%.

The market value of this company is now $10.5 billion.

At this stage, there doesn't appear to be a catalyst that will drive the stock higher in 2026. As a shareholder, I am disappointed with the company's performance.

This stock looks like an ideal acquisition target. The current management team is not making the most of the company's assets and intellectual property. Perhaps another company could do that.

There are several companies that might make sense to acquire; they are very cheap with a market value of only $10.5 billion and more than 600 million monthly active users. Many of the products that appear as images on Pinterest can be purchased from Walmart or Amazon.

If you can't find them on Amazon or Walmart, you probably won't find those products anywhere else. So, it makes sense for Amazon and Walmart.

This represents a very small part of their sales and cash flow, and they can easily accomplish this. Either this, or perhaps a change in the top leadership. But it is clear to me, and has become increasingly clear, that the current management team is finding it difficult to capitalize on the value of this business, and they continue to disappoint investors every three months.

I mentioned that I ranked this stock as one of the best stocks you can buy this year, and the value is clear, isn't it? It's all about leveraging that value, something the current management team has failed to do.

Therefore, I am losing confidence in their ability to achieve that. I am becoming less convinced that this company will continue to deliver the results I expect from it, but I reiterate that I believe its value is the best you can find in the market right now.

But my confidence is waning in their ability to tap into this value by 2026. I will keep two-thirds of my shares, and the remaining third that I bought in Pinterest I will likely sell before the end of this year for tax purposes of harvesting losses .

I bought that share of stock for approximately $34. I will sell that stake and keep the other two-thirds that I bought at approximately $19 per share.