Pinterest (PINS 0.02%) saw a stark increase in activity on its platform in 2020 and 2021 due to the COVID-19 lockdowns, but since lockdowns subsided in most of the world, shares of the social media stock have slumped. 

Pinterest has had a rough 12 months, dropping more than 70% over that period. Could this mean that shares are a steal today, or does this drop signal that investors should stay away? Two Motley Fool contributors break down that question and explain the bull and bear cases for this cheap social media stock. 

A group of friends laughing while looking at their phones.

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The bull case: A cheap stock with massive potential

Parkev Tatevosian: My bull case for Pinterest centers around a cheap valuation, a massive total addressable market, and a demonstration of economies in scale. The company boasts 433 million monthly active users (MAUs) as of March 31, which was 2 million higher than the previous quarter. Pinterest thrived at the pandemic's onset as billions of folks looked for ways to pass the time while cooped up at home.

Still, it was growing revenue even before the outbreak. Between 2017 and 2019, its sales expanded from $473 million to $1.1 billion. Of course, the pandemic boosted revenue to $2.6 billion in 2021, but the rapid expansion before highlights that it's not reliant on stay-at-home orders to drive sales.

Moreover, Pinterest has plenty of room to grow in the long run. The company's app is free to use and makes money by showing advertisements. Interestingly, marketers spent $763 billion globally in 2021, a 22.5% increase from the prior year. Additionally, businesses are shifting their spending to digital channels like social media because of the better return on investment.

PINS Price to Free Cash Flow Chart

PINS Price to Free Cash Flow data by YCharts

Given those excellent long-term prospects, it is a little surprising to find Pinterest selling at a price-to-free cash flow ratio of 20.3 -- nearly its lowest valuation in the last five years. It's arguably as good a time as any to be a bull on Pinterest. 

The bear case: E-commerce isn't for everyone

Jamie Louko: Pinterest has done a great job turning ideas into inspiration for its consumers, which has attracted millions of users. However, there needs to be more than that to be a worthwhile investment. The company has tried to become an e-commerce platform where users can go straight from idea to purchase seamlessly instead of stopping at just inspiration.

While this shift is smart, there has yet to be a lot of success: Pinterest's first-quarter average revenue per user (ARPU) was just $1.33 globally. Comparatively, other social media companies like Snap (NYSE: SNAP) have ARPUs that are more than double that of Pinterest. This isn't because of a lack of effort or investment, however. In Q1, Pinterest partnered with WooCommerce and developed a shopping application programming interface to make it easier for advertisers to turn ads into shoppable product pages. So far, however, these investments don't seem to be delivering any results. 

For Pinterest, this shift toward commerce needs to pay off. User growth doesn't look like it will be the primary growth driver anymore: In Q1, the company's MAU count dropped 9% year over year to 433 million. Therefore, the primary opportunity it has is to grow its ARPU by becoming an e-commerce platform instead of an inspiration platform.

Pinterest recently made a leadership change, taking co-founder Ben Silbermann out of the CEO chair and replacing him with Bill Ready -- formerly an executive in Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) Google commerce business. This move is smart, given Ready knows digital commerce, but this isn't a guaranteed success. Ready could overboard the platform with too many ads to boost monetization, creating a poor user experience and crushing the company's unique, creative atmosphere. 

The company is between a rock and a hard place right now, and it would require technical and efficient maneuvering to get it back on top.

Who wins out?

Whether Pinterest is worthy of a spot in your portfolio or not is based on your risk tolerance. If the company can succeed over the long term, the chances of seeing multiibagger returns are enormous. That said, there are many bumps in the road for the company to get there. If management steps on the gas too hard or moves too slow, the business could struggle.

However, if your portfolio is diversified enough that you could stomach a risky investment, Pinterest might be for you. Given its upside, if the company can successfully monetize its vast user base, it could do wonders for your portfolio over the long term.