Pinterest (PINS +2.85%) and Meta Platforms (META 0.55%), the tech giant formerly known as Facebook, approach the social media market from two different directions. Pinterest encourages its users to share their interests, hobbies, and ideas on its virtual pinboards, and it enables retailers to promote their products via shoppable pins. That interest-driven format insulates Pinterest from the hate speech and fake news controversies that have plagued Facebook and other social media platforms.
Meta's sprawling ecosystem incudes Facebook, Messenger, Instagram, WhatsApp, and its virtual reality services. Facebook encourages its users to tether themselves to their friends, family members, and frequented businesses through its network and Messenger app. Instagram persuades its users to follow popular accounts and brands. It also offers some "social shopping" features across both platforms.
Image source: Getty Images.
Both Facebook and Instagram introduced more short-form videos (via Watch and Reels, respectively) to counter ByteDance's TikTok. WhatsApp's messaging app appeals to users who spend less time on its social media platforms, and it's locking more users into its nascent Horizon Worlds metaverse playground with its VR headsets.
Pinterest's valuation hovers around $16.6 billion and it claimed 433 million monthly active users in its latest quarter. That makes it a lot smaller than Meta, which has a market cap of about $411 billion and tallies 3.65 billion active users monthly through its "family" of apps last quarter. But could Pinterest catch up to Meta -- or even eclipse the market leader -- by 2030?
NYSE: PINS
Key Data Points
How much larger will Pinterest grow?
Pinterest's revenue rose 51% in 2019, grew 48% in 2020, and increased by 52% to $2.6 billion in 2021. It also turned profitable by non-GAAP (generally accepted accounting principles) and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) measures in 2019, and it stayed in the black by both metrics in 2020 and 2021.
Pinterest's growth accelerated significantly throughout the pandemic as people stayed at home and searched for more online shopping ideas, home improvement projects, recipes, and family activities on its platform. As a result, its monthly active users (MAUs) soared to an all-time high of 478 million in the first quarter of 2021.
But in 2022, analysts only expect Pinterest's revenue to rise 9% to $2.8 billion as its adjusted EBITDA plummets 50% to $407 million. That deceleration can be attributed to Pinterest's ongoing loss of MAUs in a post-pandemic world, the impact of inflation and other macroeconomic headwinds on the broader digital advertising market, and the slowdown of the e-commerce market -- which has curbed the market's interest in Pinterest's shoppable pins.
However, Pinterest's MAUs stabilized in the first half of fiscal 2022, while the average revenue per user (ARPU) across its three highest-revenue markets -- the U.S., Canada, and Europe -- continues to grow year over year. That's why analysts still expect Pinterest's revenue and adjusted EBITDA growth to stabilize and accelerate over the next two years.
|
Period |
2022 |
2023 |
2024 |
|---|---|---|---|
|
Estimated Revenue Growth |
9% |
16% |
20% |
|
Estimated Adjusted EBITDA Growth |
(50%) |
38% |
40% |
Data source: S&P Global.
If that best-case scenario occurs and Pinterest continues to grow its annual revenue at a compound annual growth rate (CAGR) of 20% between 2024 and 2030, it could generate nearly $12 billion in revenue by the final year.
But that would still only be about a tenth of the $117.9 billion in revenue Meta generated in 2021, and less than a third of the $39.4 billion in net income it brought in that year. In other words, it's highly unlikely that Pinterest will become larger than Meta by the end of the decade -- unless antitrust regulators abruptly break up Meta's entire business.
But Pinterest could have more upside potential than Meta
Nevertheless, Pinterest could still grow at a much faster clip than Meta over the next few years. Analysts currently expect Meta's revenue to grow at a lackluster CAGR of 8% between 2021 and 2024 as it deals with the slower growth of its core platforms, Apple's privacy changes on iOS, competition from TikTok and other platforms, and macroeconomic headwinds.
It's also running out of room to grow since its family of apps already serves nearly half of the world's population. Meta believes the expansion of its metaverse ecosystem will reduce its dependence on those aging platforms, but that money-burning effort might only rein in a niche group of VR users.
Pinterest's stock doesn't look cheap at 40 times forward earnings, especially relative to Meta's forward price-to-earnings ratio of 14. But if Pinterest plays all its cards right, it just might generate bigger returns for investors than Meta over the next eight years -- even if it doesn't come anywhere close to matching the social media leader's market capitalization.
