Pinterest (NYSE:PINS) is a pandemic darling that ruled in 2020. The site became the go-to social media platform for users who were keen to learn about baking and DIY home decor ideas. But the image-based search engine saw its luck change in the post-pandemic world. As the lockdown restrictions started easing and people began heading to physical stores, PINS stock started to see a decline.

The stock did not react well to the end of the pandemic. Pinterest reported a decreasing user base and underwhelming earnings reports for the past two quarters. The PayPal (NASDAQ:PYPL) acquisition news also did more harm to the company than expected.

PINS stock started 2020 at $18 and went to $12 in March. After the pandemic gained speed, the stock began to soar and has not looked back. It went to $64 in November 2020 and hit an all-time high of $89 in February.

The stock has been volatile since then and is currently trading at less than half of its all-time high at $37. The stock is down 41% over the past six months and more than 43% for the year.

In my previous coverage of the stock, I recommended investors should wait for PINS stock to hit rock bottom before making the move. The stock is now at an all-time low, and this is a chance to buy some shares. With that in mind, let’s dig deeper into my investment thesis for PINS stock. 

Pinterest’s Profits Are Soaring

Investors are concerned about the fundamentals of a company, as its profitability says a lot about its overall performance. Pinterest has seen its profits rise despite a decline in its user base. The company has consistently made profits over the last four quarters. 

Pinterest generates revenue and profit from its advertising business, which is currently in a growth stage with massive potential. The digital advertising platform is very popular with investors, as users see ads and make buying decisions.

Many users also come to the platform with a purchase in mind and use it to search for products. The company has made the necessary moves to keep users and advertisers from moving to a different platform. With new features like Idea Pins and Story Pins, Pinterest is offering an easier and more convenient method of shopping and sharing on the platform. 

To know the real state of profitability of the business, we need to consider the average revenue per user (ARPU). It reached $1.41 in the third quarter of 2020, rising from $1.03 in the same period the previous year. The domestic ARPU stood at $5.55 this quarter as compared to $3.85 in Q3 the previous year.

This is an impressive rise and as long as the ARPU continues to grow, Pinterest will be able to report strong revenue numbers. 

The Bottom Line on PINS Stock

Do not judge Pinterest based on the user numbers or the post-pandemic drop because that is not what the company is about. It has certainly benefited from the pandemic, like many other companies including Netflix (NASDAQ:NFLX). But the fears of a new Covid variant could work in favor of the company.

I also believe the user decline will stabilize this quarter. Pinterest might not attract new users, but the decline in monthly active users will stabilize soon. 

However, the user base is not the only aspect that will help Pinterest succeed. It is creating value for brands and users, which is attracting them to the platform. PINS stock has a long way to go and it is trading at rock bottom now. 

Stop comparing Pinterest’s growth to that of its pandemic highs. It will pick up in the coming year, and this is when we will see a rise in profitability. Those who buy PINS stock now will enjoy high rewards in the coming months. 

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.