Sometimes we lose track of some stocks. For me, Pinterest (NYSE:PINS) is one of those companies. The last time I wrote about Pinterest was at the end of January. At the time, PINS stock was trading around $22.

I thought it was a buy.

“I’ve been a fan of Pinterest’s business model ever since it went public last April,” I wrote on January 31. “I liked it when it was trading above $30 in late August through September, and I really liked it when it was flirting with $20 in mid-November.”

Like every stock, it had a March swoon, falling to as low as $10.10. Of course, in the eight months since, it’s recovered all its losses and then some. As of Dec. 8, it has a year-to-date total return of 275%.

On Oct. 28, it reported third-quarter earnings that were off-the-charts good. Its stock has gained 45% in the six weeks since. Its stock is on fire heading into 2021.

Is it still a buy?

Here are my reasons why I think it is.

International Growth Potential

I can’t remember when I first recommended PINS stock. I believe it was sometime in early 2019. In September 2019, I argued it was a buy under $30.

“In July, I argued that Pinterest stock was a better buy than Snap (NYSE:SNAP) because its pathway to profitability was more straightforward. With 300 million monthly active users and growing, consumer brands will continue to migrate to Pinterest to break through the online noise,” I wrote.

“Furthermore, as the company continues to execute its business strategy in both the U.S. and internationally, its average revenue per user will continue to rise. When Pinterest’s international ARPU is above $1.00, you can be sure it will be making money on a non-GAAP basis.”

Well, its pathway to profitability’s been far quicker than I imagined.

Pinterest reported average revenue per user (ARPU) in the third quarter of $1.03, 14% higher than a year earlier, and 47% higher than in the second quarter.

U.S. ARPU was $3.85, 31% higher than a year earlier and 54% higher than in the second quarter. Meanwhile, its International ARPU was $0.21, 66% higher than a year earlier and 50% higher than in Q2 2020.

As Pinterest’s Q3 2020 letter to shareholders stated, the company’s international ARPU is in the early stages, leaving plenty of room for growth.

I said that it would be profitable on a non-GAAP basis when ARPU hit $1. It’s a long way from that bogey.

Yet, over the past four quarters through the end of September, it generated a trailing 12-month non-GAAP profit of 8 cents and a GAAP loss of just 64 cents. If it continues this pace, I could see it making money on a GAAP basis in 2021.

Pinterest is delivering and then some.

Monthly Users and PINS Stock

Pinterest had 442 million monthly active users at the end of September, up from 416 million at the end of June,  367 million at the end of March, and 335 million at the end of December 2019.

Pinterest’s Market Cap/MAU for Past 4 Quarters

Quarterly MAUs	Shares O/S	Market Capitalization	Market Cap/MAU
335 million	639.6M	$11.9B	$35.52
367 million	576.3M	$8.9B	$24.25
416 million	586.7M	$13.0B	$31.25
442 million	676.3M	$28.1B	$63.57

Except for the March correction, it’s been a straight shot higher on its valuation. And it’s not about to stop.

In the two months since, the market cap per MAU has increased by 66% to $105.58. Assuming its MAUs increases by 6% sequentially in the fourth quarter and its share price stays the same — $69 as I write this — its market cap per MAU will finish the year at $99.60, 180% higher than a year earlier.

And that’s without scratching the surface of its international expansion.

The Bottom Line

Pinterest is currently valued at 31 times its TTM sales of $1.4 billion. Based on 2019 sales of $1.1 billion, it finished last year at 10 times sales. From that perspective — and a 275% increase in its share price — PINS is definitely not cheap.

However, when you consider that Pinterest’s international business at the end of 2019 represented just 12% of its overall revenue and only 16% in the first nine months of 2020, it hasn’t come close to achieving its full potential as a global social media platform.

When Pinterest’s revenues get to a 50/50 split, you can be sure its stock will be worth a heck of a lot more than $69.

Are there going to be bumps in the road over the next three to five years? You bet. But it will be worth it.

PINS is definitely a long-term buy.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.