Pinterest: A Strong Contender in the Social Shopping Arena

Pinterest (NYSE: PINS) stands out among social media platforms through its unique focus on user interests. Instead of merely browsing content, users engage by pinning images, videos, and websites to their virtual pinboards. This user-generated content significantly enhances its advertising capabilities, allowing Pinterest to provide more tailored first-party ads compared to data-oriented advertising rivals.

The platform also excels in showcasing “shoppable” pins, which enable users to buy products directly from their boards. Due to this feature, many retailers have uploaded their complete catalogs to Pinterest, and the integration of Shopify‘s (NYSE: SHOP) e-commerce tools has facilitated smaller merchants as well.

Image source: Pinterest.

The unique blend of social networking and shopping positions Pinterest well in the “social shopping” market. A report by Grand View Research anticipates that this market will expand at a compound annual growth rate (CAGR) of 31.6% from 2023 to 2030, pulling shoppers away from traditional e-commerce sites. Additionally, Pinterest enjoys an advantage over Amazon (NASDAQ: AMZN), which has struggled to penetrate this niche with comparable platforms like Spark.

With a market capitalization of $22 billion, Pinterest pales in comparison to Amazon’s staggering $1.99 trillion valuation, making it the fifth most valuable company globally. Investors may wonder: can Pinterest close the gap with Amazon by 2050 as the social shopping sector expands? Alternatively, will its growth plateau as it exhausts its niche and loses its competitive edge?

Growth Trajectory of Pinterest

Pinterest became a public company in 2019. Since then, from 2019 to 2023, it achieved a revenue growth rate of 28% CAGR, with its monthly active users (MAUs) increasing from 335 million to 498 million. By the end of the second quarter of 2024, this figure rose to 522 million.

During the peak of the pandemic, Pinterest enjoyed a surge as users sought online inspiration for shopping ideas, recipes, DIY projects, and home improvements. However, as consumer behavior normalized, growth slowed, prompting skeptics to label it a fad amidst larger platforms like Meta Platforms‘ (NASDAQ: META) Instagram.

Nonetheless, Pinterest persisted in its expansion, reaching new international markets and attracting a younger audience, with over 40% of its MAUs identifying as Gen Z. This strategy reduces reliance on older millennial users. The platform also launched short video tools to compete with TikTok, enhanced AI-driven recommendations, and incorporated more e-commerce functionality into shoppable pins.

Looking ahead, analysts project Pinterest’s revenue will grow at a CAGR of 17% from 2023 to 2026. They also predict it will return to profitability in 2024 after two years of losses, with net income expected to grow at a CAGR of 57% over the next two years.

Pinterest’s Potential by 2050

With over 500 million MAUs, Pinterest’s user base still lags behind Meta’s 3.7 billion daily active users across its platform family, which includes Facebook and Instagram. The UN projects the global population will rise from 8.7 billion to 9.7 billion by 2050, suggesting Pinterest could grow its audience significantly if it maintains its first-mover advantage in social shopping.

If Pinterest keeps up its competitive edge and meets analyst targets through 2026, it could achieve revenues of $141 billion by 2050, assuming it grows its revenue at a steady CAGR of 15%. At eight times its trailing sales, this could elevate its market cap to around $1.13 trillion by that year.

However, even at that valuation, Pinterest would still represent about 40% less value than Amazon today. From 2023 to 2026, analysts estimate Amazon’s revenue will grow at a CAGR of 11%, maintaining its dominance in e-commerce and cloud sectors, while currently being valued at three times its trailing sales.

If Amazon aligns with Wall Street forecasts, retains its price-to-sales ratio, and reports a modest 10% growth from 2026 to 2050, its market cap could exceed $23.4 trillion. While Amazon’s growth may eventually slow, it is likely to remain significantly more valuable than Pinterest by 2050.

Focusing on Growth Rather than Market Cap

While Pinterest may not reach Amazon’s market cap, it still has the potential for greater gains than the e-commerce giant. Pinterest is smaller, enjoying faster growth and greater potential in the social shopping niche. Additionally, it could seek acquisitions of other media or e-commerce enterprises to broaden its ecosystem, evolving into a more diversified tech entity like Amazon. Investors should consider the long-term growth potential of both companies rather than focusing solely on their market capitalizations.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and speaker for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is also a member of The Motley Fool’s board. Leo Sun holds positions in Amazon and Meta Platforms. The Motley Fool recommends Amazon, Meta Platforms, Pinterest, and Shopify.

The views and opinions expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.