In the social media space, Pinterest (PINS) remains an intriguing pick for long-term investors to consider. Indeed, this is a stock that has seen some pretty strong momentum since its mid-May lows of around $55 per share. Since then, Pinterest has rallied roughly 40% and remains a stock with tremendous momentum right now.

Pinterest is still roughly 15% below its all-time highs, which were set earlier this year. Additionally, the average analyst target price for Pinterest sits right around the company’s all-time high. Accordingly, growth investors certainly have reason to believe this stock could go meaningfully higher from here. (See Pinterest stock charts on TipRanks)

However, a 12%-15% projected upside from current levels may not appear to be that enticing to many growth investors. After all, there are a wide range of stocks with target upside percentages much higher than that of Pinterest.

That said, let’s dive into why PINS stock could continue to outperform through the rest of 2021 and potentially beyond.

Earnings Highlight Strength of Pinterest’s Growth Model

When it comes down to brass tacks, long-term investors are primarily concerned with owning companies that continue to generate strong performance. Looking at quarterly earnings results and keeping tabs on which direction a given company is moving is a great way to assess the trajectory in which a company, and therefore its stock, is likely to be headed.

In the case of Pinterest, this company’s recent earnings have been fantastic. Among the key metrics the company reported include the following:

· Q1 revenue growth of 78% year-over-year to $485 million

· Global monthly active user (MAU) growth of 30% year-over-year to 478 million

· Q1 adjusted EBITDA of $84 million, with a GAAP net loss of $22 million for the quarter

Broadly speaking, these numbers are solid.

That being said, investors wouldn’t know this initially from the company’s post-earnings selloff in May. Indeed, the key takeaway for many investors from this earnings call was the company’s rather low projected MAU growth rate in the “mid-teens” moving forward.

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Such a projection is materially lower than Pinterest’s recent MAU growth of 30% year-over-year. However, investors ought to be skeptical of any forward guidance, as the company’s management team may simply be taking an ultra-conservative approach to these growth metrics, given the unknowns the social media sector will see coming out of this pandemic.

Additionally, it’s important to remember that Pinterest’s focus is on growing profitably, and not necessarily quickly. Pinterest recently announced that the company is adding new shopping features for its users, as well as more back-end selling features for its merchants. These features allow for a more streamlined search process for customers, a move the company hopes will generate more revenue per active user over time.

Accordingly, Pinterest is a stock that should be viewed as a potential cash flow machine. This company’s interest isn’t necessarily in growing larger at any cost. The company has a highly engaged audience to whom it is seeking to sell more products. By focusing on what makes the company great, and increasing its revenue per active user, Pinterest could turn out to be one of the most undervalued social media plays on the basis of long-term future earnings.

What Analysts Are Saying About PINS Stock

According to TipRanks’ analyst rating consensus, PINS stock comes in as a Moderate Buy. Out of 19 analyst ratings, there are 12 Buy recommendations and 7 Hold recommendations.

As for price targets, the average Pinterest price target is $86.33. Analyst price targets range from a low of $65.00 per share to a high of $102.00 per share.

Bottom Line

Growth at any price shouldn’t be what investors are after. Rather, profitable growth is the true quest all long-term investors are on.

For social media companies, creating a large network effect certainly holds long-term value. Just look at peers such as Facebook (FB) and what that company has accomplished over the past decade alone.

However, considering Pinterest’s narrowing losses and strong EBITDA performance, there are indications this is a company that’s about to open the taps when it comes to earnings potential. That’s what could make this company a great pick at these levels today.

Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.