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pinterest (PINS 3.03%) surprised investors on June 28 by announcing that Ben Silverman, who co-founded the social media company, would step down as CEO and become its executive chairman instead. Silverman will be replaced by Bill Ready, who previously directed Alphabetit is (GOOG -0.27%) (GOOGL -0.21%) commerce and payment efforts at Google.

Shares of Pinterest initially soared 10% during after-hours trading on June 28 following the announcement, but later gave up most of those gains and advanced just 1% on June 29. The stock still remains down around 75% over the past 12 months, and it sits just above its IPO price of $19.

Image source: Pinterest.

Bulls might argue that Pinterest looks undervalued at 23x forward earnings and four times sales this year, but can Ready actually drive new growth for the struggling social media company in this tough market?

What happened to Pinterest?

Pinterest carved out a niche in the crowded social media marketplace with its virtual pinboards, which allowed people to pin and share their hobbies, interests and ideas through photos and videos. on line. This visual approach has made it a natural fit for online merchants and advertisers. As an interest-driven platform, Pinterest has also been immune to the fake news and hate speech scandals that have plagued Metaplatforms(META -0.76%) facebook and Twitter.

Pinterest was already growing like a weed before the pandemic. Between the fourth quarter of 2016 and 2019, its monthly active users (MAUs) more than doubled, from 160 million to 335 million. Its revenue grew from $299 million in 2016 to $1.14 billion in 2019, representing a compound annual growth rate (CAGR) of 56%. Meta grew its annual revenue at a CAGR of 37% over the same period.

When the pandemic began, Pinterest’s growth accelerated dramatically as more people stayed home and used its pinboards to search for online shopping ideas, recipes, DIY projects and other home activities. As a result, its MAUs soared 37% to 459 million in 2020, its revenue grew 48% to $1.69 billion, and it became profitable based on generally accepted accounting principles (GAAP) in the fourth quarter of the year.

Pinterest’s MAUs rose again to 478 million in the first quarter of 2021, but that would actually represent its all-time peak. By Q1 2022, its MAUs had dropped to 433 million as people spent less time on the platform in a post-lockdown market. Its revenue still increased by 52% to $2.58 billion in 2021, mainly thanks to its growth in the first half, and it generated a net profit of $316 million for the full year. But for 2022, analysts expect its revenue to rise just 17% as its adjusted earnings per share (EPS) fall 17%.

Can Bill Ready stabilize Pinterest’s business?

Pinterest’s decision to hire Bill Ready as its new CEO signals that it’s serious about evolving into a “social commerce” platform that blurs the lines between a social network and an e-commerce marketplace.

Under Silverman, Pinterest has already taken a step in this direction by integrating Shopifypayment services in its Buyable Pins, encouraging big retailers like Ikea to upload their catalogs and opening up its platform for integrations with Woocommerce, To block‘s Square Online Store and other third-party services.

However, Pinterest’s social media peers have also grown into the same market. Meta allowed Instagram users to create shoppable posts, InstantaneousSnapchat launched shoppable ads, ByteDance’s TikTok rolled out shoppable content, and Twitter began testing shoppable profiles over the past year. Bears will say that Pinterest didn’t strike while the iron was hot last year – when it allegedly considered a sell-off at PayPal instead – and it could lose ground to these hungry social commerce rivals this year.

Pinterest is addressing those concerns by hiring Ready, but Google’s payments and e-commerce businesses haven’t exactly taken off under his two-and-a-half-year tenure as president of commerce, payments and the ‘next billion’. users”. Google is still far behind Amazon in online product searches, and Google Pay continues to face fierce competition in the digital payments market. Before joining Google, Ready was the chief operating officer of PayPal, which struggled with a disappointing downturn after leaving in late 2019.

Pinterest still not worth buying

Ready has plenty of experience with e-commerce and payment platforms, but investors need to see if it can stabilize Pinterest’s MAU growth first before expanding its social shopping capabilities. If Pinterest continues to bleed MAUs, marketers will likely turn to growing platforms like Instagram and Snapchat, which are also more popular with Gen Z users.

Therefore, I don’t think investors should just buy Pinterest stock now and blindly give Ready the benefit of the doubt. It could eventually steer Pinterest in the right direction, but turning this struggling social media company around may require a lot more than an expansion of its social commerce features.