Pinterest (NYSE:PINS) has been a painful stock to own. The social-media company's stock tumbled more than 40% this year as it lost 34 million monthly active users (MAUs) over the past two quarters.

Pinterest attributes that slowdown to reopening trends in a post-pandemic world, which caused people to spend less time browsing for recipes, DIY projects, family activities, and other ideas on its virtual pinboards.

But as many investors fret over its loss of MAUs, fewer perhaps pay attention to the company's rising average revenue per user (ARPU) and robust, overall financial results. Analysts still expect Pinterest's revenue and earnings to soar 51% and 162%, respectively, this year -- which is stellar for a stock that trades at 33 times forward earnings.

Pinterest's iPad app.

Image source: Pinterest.

If we cut through all this near-term noise, could Pinterest's market value soar from about $23 billion today to more than $1 trillion by 2040? Let's study the potential catalysts, challenges, and future valuations to find out.

Social network to e-commerce platform

Analysts frequently compare Pinterest to other social networks like Meta's (NASDAQ:FB) Facebook and Instagram. However, Pinterest's shoppable pins, which encourage retailers to upload their entire catalogs to its pinboards, could gradually transform its network into an e-commerce platform.

Back in 2019, a Cowen & Co. survey found that 48% of U.S. social media users went to Pinterest to find or shop for products. By contrast, only 14% started those searches on Facebook while 10% went to Instagram.

That's why big retailers like IKEA upload their print catalogs to Pinterest and Shopify (NYSE:SHOP) partnered with Pinterest to enable smaller merchants to launch shoppable pins with integrated payment options. That's also probably why PayPal (NASDAQ:PYPL) was reportedly interested in buying Pinterest for about $45 billion earlier this year.

As social media platforms are increasingly used to sell products, Grand View Research expects this global "social commerce" market to expand at a compound annual growth rate (CAGR) of 28.4% between 2021 to 2028.

Could Pinterest match the market's growth?

If Pinterest merely matches that market's growth rate, its revenue could rise from an estimated $2.6 billion this year to nearly $15 billion in 2028.

That could happen if Pinterest leverages its early-mover's advantage in the market to lock in more retailers and small merchants. The expansion of that ecosystem with newer social-shopping features, such as live videos, could convince top social-media influencers to promote more products on Pinterest.

Pinterest should also benefit from the growth of overseas e-commerce markets. Last quarter, 356 million of its 444 million MAUs were located outside of the U.S. -- especially in Brazil and Mexico -- two booming e-commerce markets. Morgan Stanley expects Latin America's e-commerce penetration rate to rise from about 9% this year to 16% in 2025 and to 50% over the next few decades.

That expansion, which will likely be mirrored in other emerging markets, could boost the value of Pinterest's overseas users, which only generated 7% as much ARPU as its domestic users did last quarter.

If Pinterest generates $15 billion in revenue in 2028, then continues to grow at a more modest CAGR of 15% over the next 12 years, it could potentially generate $80 billion in annual revenue by 2040. If Pinterest were to be valued at 13 times its trailing sales (just a bit higher than its current price-to-sales ratio of ten) by the end of that year, it could be worth more than $1 trillion.

But Pinterest could still face an uphill battle

Of course, that's a lot of "ifs." Pinterest has a viable path toward joining the 12-zeros club, but it could still face a lot of challenges. Facebook, Instagram, Snap (NYSE:SNAP), ByteDance's TikTok, and other social media platforms are all ramping up their social-commerce efforts, and Pinterest's early-mover's advantage could quickly fade away if it fails to innovate or stem its loss of active users.

Pinterest could generate big multibagger returns, but we shouldn't turn a blind eye to its flaws. The next several quarters will be challenging for the company -- and it needs to stabilize its MAU growth and meaningfully increase its overseas APRU before investors can focus on its long-term growth potential again.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.