Pinterest (PINS 0.25%) has found new life since hiring former PayPal executive Bill Ready as its new CEO last year. After seeing monthly active users decline 6% in 2021, Pinterest turned that around by growing its monthly user base by 4% in 2022.  

With a new CEO and a return to growth, Wall Street is becoming more upbeat about the company's prospects. The stock is up 22% over the last six months but still down 68% from its all-time high following the market sell-off last year. 

Let's look at Pinterest's competitive position compared to other social media platforms, and whether the stock is worth buying right now.

Pinterest fell behind other social media platforms

The challenge for any social media platform is to win -- and maintain -- a share of users' time. This is very difficult these days, with several top social media apps, including ByteDance's TikTok, gaining popularity at the expense of more established choices like Meta Platforms' Facebook.

While Pinterest finished the year strong in 2022, it failed to keep pace with Snap (SNAP 1.73%), the owner of Snapchat, which dealt with the same macroeconomic headwinds as Pinterest. Advertisers are pulling back on spending due to the uncertain economy, and ads generate virtually all of Pinterest's revenue.

But in this challenging environment, Snap was able to grow revenue by 12% year over year in the fourth quarter, led by a 17% increase in daily active users. Pinterest reported top-line growth of just 4%. 

Snap has also grown revenue faster than Pinterest over the last few years.

PINS Revenue (Quarterly) Chart

Data by YCharts.

Snap grew faster while also trading at a cheaper valuation. Pinterest trades at a price-to-sales (P/S) ratio of 6.6; Snap trades at 3.7 times trailing revenue. 

The video and interactive features that are driving the momentum for TikTok and Snapchat appear to be the main factors holding back image-based Pinterest.

However, what's interesting is that Wall Street analysts expect Pinterest to drive significantly higher revenue growth than its top competitors over the next few years.

PINS Annual Revenue Estimates Chart

Data by YCharts.

This explains why the market is willing to pay a higher P/S to own Pinterest over either Snap or Meta Platforms right now. We need to find out what Pinterest is doing to justify those expectations.

How can Pinterest grow faster?

The company is focused on finding ways to drive higher engagement from users. Management is looking at several improvements, including leveraging the buyer intent that characterizes the traffic on Pinterest, to allow users to buy things based on the interesting Pins they find. This would naturally suit Ready's background coming from a leading digital payments provider like PayPal.

But commerce would be just icing on the cake. Pinterest will continue to rely on advertising revenue for the bulk of its growth. With almost a half-billion users already on the app, the key to unlocking more growth will come from increasing average revenue per user, which only grew 1% globally in the fourth quarter. 

One way it can boost user monetization is by leveraging user data. Pinterest Predicts has accurately forecast global trends in the year ahead very consistently over the last three years. This could prove very valuable to advertisers that would love to take advantage of these insights on Pinterest's platform.

Pinterest's data can also help improve the user experience with smarter personalization. The company is already investing to get better at this. In fact, management credited its return to user growth last year to investments for improving search relevance and personalization. 

But the greatest opportunity is to copy what is driving momentum for TikTok, and that is video. This is vital if Pinterest wants to stay relevant with younger generations.

The good news is that Pinterest is already showing progress on this front. In the fourth quarter, the company reported accelerating growth from Gen Z users. Management said that half of all videos pinned in the quarter were from this demographic. If Pinterest continues to invest in this area on top of e-commerce features, the app's popularity could take off.

The stock is worth buying

While Pinterest hasn't been the fastest-growing social media platform lately, it clearly has things it can do to grow revenue faster and gain users. Because it isn't quite performing to its potential yet, I believe the stock has upside and is worth holding for the long term.