Pinterest (PINS) recently reported strong first-quarter earnings, but forecasted slowing user growth as the pandemic resolves. Wall Street didn't like that news. At the same time, fears about inflation have sparked a broader sell-off in the tech sector, and Pinterest stock is now down 30% from its 52-week high.

But there's a silver lining: Wall Street is missing the big picture, focusing instead on short-term headwinds. That has created a buying opportunity for long-term investors. Here are three reasons to add Pinterest to your portfolio.

1. Pinterest is unique

Pinterest is a social platform for inspiration, a place where people can find new ideas and plan their future. To that end, its platform combines artificial intelligence, visual media, and search functionality to create a unique user experience.

Two people smiling and looking at a smartphone.

Image source: Getty Images.

Put another way, traditional social platforms support visual media, and traditional search engines enable text-based (or even visual) queries. But Pinterest blends the best of both, using AI-powered visual searches and machine learning to make predictive recommendations.

As a result, people don't come Pinterest to engage with friends or family, or to access simple search functionality. They come to Pinterest to be inspired -- to find the perfect recipe, outfit, product, or idea, even when they don't have the words to describe it.

Pinterest has further separated itself by creating a positive, feel-good environment. Other social media platforms are often mired by negativity, but Pinterest's creator code keeps the platform safe for all users.

Ultimately, these unique qualities make Pinterest a better place for brands and marketers to spend their ad dollars.

2. Pinterest has a strong growth strategy

Pinterest has a simple yet effective growth strategy: Inspire consumers and empower marketers. These two initiatives create a flywheel effect, and it all starts with engaging content.

Pinterest uses technologies like artificial intelligence and computer vision to personalize the user experience. To add, the company recently introduced Story Pins, a new content format that enables creators (i.e. chefs, trainers, designers) to blend images and videos to tell a story. This helps them build an audience, while allowing users to learn from professionals.

So far, Pinterest's efforts to inspire people are paying off, as its user base is growing quickly.

Metric

2017

Q1 2021

CAGR

Monthly active users

216 million

478 million

28%

Source: Pinterest SEC Filings. CAGR: compound annual growth rate.

Notably, more people on Pinterest means more data to power the AI models, which translates into a more personalized experience for everyone. And as more people join, Pinterest becomes a more valuable ad platform for brands, which brings us to the second part of the flywheel.

Pinterest has gone to great lengths to support marketers. Last year, it simplified catalog uploads, introduced new measurement tools, and launched automatic bidding for ad campaigns -- all of which are targeted at bringing more brands (and content) to the platform.

So far, these efforts have been very successful. Catalog uploads increased tenfold through the first half of 2020, and automatic bidding drove 29% more clicks and 28% more conversions. By the end of the year, the number of businesses using shopping ads on Pinterest had skyrocketed 500%.

That momentum carried into 2021. The number of consumers engaging with shoppable content surged 200% in the first quarter, and the number of product searches grew twentyfold.

On the whole, this flywheel effect has powered strong top-line growth.

Metric

2017

Q1 2021

CAGR

Revenue

$472.9 million

$1.9 billion

54%

Source: Pinterest SEC Filings. TTM: trailing 12 months. CAGR: compound annual growth rate.

But Pinterest has grander plans: It will begin testing on-platform transactions this year, allowing users to buy products directly through the app. This is the missing link between inspiration and action, and it should drive conversion by streamlining the checkout process. In other words, this should make Pinterest a more valuable partner to brands and marketers. Moreover, it could expand the company's market opportunity by allowing Pinterest to take a cut of payments processed on its platform.

3. Pinterest is gaining traction in international markets

In 2020, international markets accounted for nearly 79% of Pinterest's user base, but only 16% of revenue. That discrepancy is a significant growth opportunity, and the company is making progress.

Person touching an upward-trending bar graph.

Image source: Getty Images.

On Pinterest's Q1 earnings call, CFO Todd Morgenfeld said international sales soared 170% during the quarter, and now represent nearly 20% of total revenue. He attributed this success to patience. Pinterest launches products in the U.S. first, tweaking them in its home market rather than rushing to roll them out internationally.

In total, Pinterest now serves ads in 29 countries, with Brazil being the most recent addition. And the company is doubling down on Latin America, with plans to enter Mexico in the current quarter. Even so, Morgenfeld sees plenty of growth ahead, saying Pinterest is still in the "early days" of international monetization.

Tying everything together, Pinterest has a unique business model, a strong growth strategy, and is gaining traction internationally. All of those advantages should drive growth over the next decade. That's why investors should consider adding Pinterest to their portfolio.