Pinterest (NYSE: PINS) shares have tumbled to their lowest point since May 21, trading around $18.28—a 60% drop from the 2024 peak and roughly 30% below the year's starting level. The steep decline has left the stock looking inexpensive on traditional valuation metrics, but a closer look at the company's growth trajectory and chart patterns suggests the selloff may not be finished.
Growth deceleration weighs on sentiment
The social media platform has been under pressure as investors reassess its growth prospects in an increasingly competitive landscape. Rivals like TikTok and Meta continue to dominate user attention and ad spending, making it harder for Pinterest to expand its market share.
In the second quarter, Pinterest reported revenue of $1.18 billion, up 18% year over year—a respectable figure but one that reflects a slowdown from earlier growth rates. Monthly active users (MAUs) rose 11% to 640 million, yet the crucial U.S. and Canada segment, which generates the bulk of revenue, saw MAU growth of just 4%. Revenue from that region climbed 18% to $880 million, while Europe and the rest of the world grew 12% and 38%, respectively.
Looking ahead, analysts project third-quarter revenue of $1.21 billion, representing a 14.8% annual increase. For the full year, the consensus estimate sits at $4.91 billion, up 16.3% from last year. The company is also expected to improve profitability, aided by investments in artificial intelligence and recent workforce reductions.
Cheap valuation attracts bargain hunters
Pinterest's forward price-to-earnings ratio has compressed to approximately 9.9, well below the sector median of 13.3 and its own five-year average of 25. This low multiple has made the stock look like a potential bargain, and some see it as an attractive acquisition target—either for private equity firms or for tech companies seeking valuable user data. Activist investor Elliott Management has already taken a stake, adding to speculation about a possible buyout.
Management has been buying back shares aggressively, spending $2 billion on repurchases. Additionally, the company entered a capped call transaction to raise the effective dilution breakpoint on its convertible notes to $30.59, a move that signals confidence in the stock's long-term value.
Technical picture remains bearish
From a technical standpoint, Pinterest's stock has formed a rounded top pattern, with the price sliding from a high of $25.60 on August 4. The Average Directional Index (ADX) has climbed to 22.37, its highest level since mid-July, indicating that the downtrend is gaining momentum. The shares have broken below the 50-day moving average and the Ultimate Support level on the Murrey Math Lines tool.
Given these signals, the stock could continue to fall, with some analysts pointing to $10 as a potential downside target. However, history suggests that sharp declines often attract dip buyers, and a rebound could eventually materialize. For now, the risk-reward profile remains skewed to the downside, and investors should weigh the possibility of further losses against the stock's discounted valuation.
For context, other beaten-down names like Rocket Lab shares have also raised the bargain-or-trap question. Similarly, Michael Burry's bet on Lululemon highlights the debate over buying falling stocks. Meanwhile, broader market moves, such as the Dow's recent surge, show that investor sentiment can shift quickly.
This article is for informational purposes only and does not constitute financial advice.
