Pinterest (PINS -1.41%) is one of many growth tech stocks to lose more than two-thirds of its value in the bear market. Still, at a time when many of these companies experienced slowing growth, Pinterest has seen fewer users on its site following the end of lockdowns.

Such struggles have led to changes in the C-suite and a significant investment from an activist investor. The question for smaller investors is whether that justifies adding positions in Pinterest?

What's going on with Pinterest?

Pinterest has undergone a radical transformation in recent weeks. Amid sluggish growth, the company has decided to make itself more of an e-commerce stock.

To this end, it has made changes at the top. Co-founder Ben Silbermann vacated the CEO position and became Pinterest's executive chairman. The company hired Bill Ready, the Google president of commerce from Alphabet, to replace him.

Pinterest has also received a big vote of confidence from Elliott Investment Management, which took a 9% position, according to The Wall Street Journal. Its price-to-sales ratio of five, which is close to record lows, may have influenced this decision. But Elliott has also developed a reputation as an activist investor, a factor that could improve investor returns.

Change is probably needed. Admittedly, all e-commerce and social media stocks have suffered in recent quarters as users resumed offline activities. However, many of its peers maintained positive, albeit slower, growth.

Although Pinterest kept revenue growth positive, its results suffered in one key area -- the monthly active user (MAU) counts. In the first quarter of 2022, MAUs came in at 433 million. That amounted to a growth of less than 1% compared to Q4 and a 9% decline from the same quarter last year.

Reasons for hope

E-commerce has become its strength over time. Users pin items based on ideas and passions. Pinterest uses this information to place promoted pins, or ads based on interests, onto customers' screens.

This focus on individual preferences can give Pinterest a leg up over other social media companies, which rely more on demographic and psychographic modeling to market to customers. Since 45% of U.S. households on Pinterest earn over $100,000 per year, these customers have money to spend on such interests.

Furthermore, even as MAUs suffered, average revenue per user (ARPU) grew during this time. In Q1, global quarterly ARPU of $1.33 rose 28% year over year. This included $4.98 in ARPU for U.S. and Canadian users during that period. Although Pinterest registered a quarterly ARPU of only $0.08 outside of the U.S., Canada, and Europe in Q1, it rose 164% year over year, a sign of its potential for considerable increases.

The rising ARPU also gave Pinterest a respectable financial performance. Q1 revenue of $575 million surged 18% from year-ago levels. Pinterest also cut its losses, reporting a loss of $5 million compared with a loss of $22 million in Q1 2021. Limiting the growth of costs and expenses helped reduce those losses.

Investors will have to watch Q2 closely. The company has forecasted an 11% revenue increase, which points to some slowing. Moreover, investors should also consider that global ARPU came in at $1.32 in Q2 last year. With an increase of less than 1% over three quarters, investors will probably need to see signs that it can still drive ARPU growth.

Should I consider Pinterest?

Investors who take on Pinterest positions now will buy into deep uncertainty. The new CEO and the influence of Elliott Management will lead to questions about the company's direction.

However, the valuation is near record lows, and its 433 million users give it significant influence in the social media and e-commerce spheres. While its changes do not guarantee a turnaround for the growth tech stock, a successful comeback could bring outsized investor profits.