Both users and investors have long seen Pinterest (PINS 21.02%) as the social media platform for inspiration. Pinning ideas has brought about creativity and increasingly led to sales through more effective monetization.
However, the rise of artificial intelligence (AI) could help make this creativity a more critical part of the work world. That could lead to more interest in Pinterest's platform -- and, by extension, its stock.
How is Pinterest "anti-AI"?
Admittedly, if one talks to management, it will probably classify Pinterest as an AI stock. AI plays a crucial role in understanding its users, and suggested pins often come from the company's machine learning models.
Nonetheless, Pinterest could attract those looking to circumvent AI. AI has inspired both awe and fear across society. While its abilities have impressed users and investors alike, it could replace so much human labor that it has led to fears that it could make humans obsolete or at least unemployable.
Indeed, many jobs are certain to go away because of the technology. Still, for all of AI's capabilities, current human knowledge typically forms the basis and limits of its capacity. This means that it will likely not replace human creativity. Thus, Pinterest could benefit from increased interest as users seek the inspiration that keeps them ahead of AI.
Pinterest's improvements
Pinterest is also doing more to profit from human creativity. The company hired Bill Ready as CEO to capitalize on its attributes. Under Ready's leadership, the company is doing more to attract these users and monetize their presence on the site.
For one, the AI capabilities added to the site seem to have made Pinterest more personal and relevant to its users. At the end of Q1, monthly active users (MAUs) grew 7% year over year to 463 million. Additionally, usage continues to grow on its mobile app, which now accounts for more than 80% of its total impressions.
Moreover, while the need for creativity and inspiration may attract users, monetization will likely drive share-price growth. Hence, Pinterest has worked to become more of a shopping platform. Online merchants can connect entire product catalogs to Pinterest.
According to the company, such uploads have resulted in 5 times more impressions than merchants who did not add their products. These clients also earned an average 15% additional return on ad spending. Furthermore, Pinterest attracts so-called "super shoppers," who will pay 2 times more than shoppers on other platforms.
These improvements seem to have helped the social media stock's top line. In Q1, revenue of $603 million increased by 5% compared with the year-ago period. Improved results for advertisers, better content relevance, and improved shoppability brought about the increase.
Indeed, its net loss rose to $209 million versus just $5 million in the first quarter of 2022. Still, restructuring charges and rising stock-based compensation drove that loss. With those factors removed, Pinterest reported non-GAAP net income of $58 million. This means that it is profitable when excluding non-operational factors.
Additionally, at a price-to-sales (P/S) ratio of 6, its valuation from a sales perspective is near record lows. When combining this low sales multiple with its improvements on the operations side, Pinterest looks like an increasingly compelling investment.
Consider Pinterest stock
Pinterest is technically an AI stock, but it could increase its appeal by helping users cope with the rise of AI. With the technology, one's value in the marketplace will likely depend increasingly on creativity. Since users turn to Pinterest to search for inspiration, the platform should draw growing interest.
Also, thanks to Ready's efforts to better monetize the platform, the expanding user base has resulted in rising revenue, which should eventually lead to increased profits. Thus, Pinterest's stock could not only make gains because of AI but also benefit those trying to circumvent the technology.
