What happened

Shares of Pinterest (PINS -0.89%) are down 12.2% from last Friday's close, according to data from S&P Global Market Intelligence, as doubts about valuation for the once high-flying stock continue to hang over its shares.

During the pandemic as people were herded into their homes, browsing decorating ideas was all the rage. Pinterest reached about 459 million monthly active users by the end of last year, two-thirds of whom were female, making the tech growth company an advertiser's dream destination. It's not so much that so many people were pinning their ideas, but rather this was an audience looking to spend money to transform those ideas into reality.

PINS Chart

PINS data by YCharts

Pinterest stock soared over 250% higher in 2020, but so far this year, shares of the storyboard leader are down 43% as it sheds more users.

After losing 24 million monthly users between the first and second quarter, Pinterest lost 10 million more in the third. 

Person holding tablet with Pinterest app open.

Image source: Pinterest.

So what

There might be further air beneath Pinterest stock because it is still richly valued, even after the haircut its shares have taken. The social sharing platform trades for 70 times trailing earnings and goes for over 27 times next year's estimates and 40 times the free cash flow it produces.

As Pinterest tries to rejigger its platform to improve the user experience, it admits the "new ecosystem" it is building will cause a short-term hit to performance. The platform will need to prove it can still deliver the engagement advertisers seek.

Now what

Investors just might want to keep their powder dry for the stock because despite its pricey valuation, Wall Street believes Pinterest will still be a very profitable business going forward. Analysts forecast the social media platform will more than double revenue by the middle of the decade, hitting $5.8 billion in sales, while profits will expand at a near-50% compounded rate every year for the next five years.