Visual discovery engine Pinterest (NYSE:PINS), which has been ramping up investments in its long-term growth drivers, saw strong international growth in the first quarter. However, the stock is currently trading at a lofty valuation. Given its mixed financials and the fact that it is battling several class action lawsuits, does the stock deserve its current valuation? Let’s find out.Image sharing platform operator Pinterest, Inc. (PINS) is widely known for its pins that are used to spark inspiration among users and save them to boards to keep their ideas organized. The visual social network’s shares soared 200.7% in price over the past year, driven by the company’s launch of advertising in Brazil, and strong growth in its international business. But the stock is now trading 13.5% below its 52-week high of $89.90, which it hit on February 16.
PINS’ stock slumped 7.3% over the past three months but gained 18.8% over the past month. The stock looks expensive at its current price level. In terms of non-GAAP forward P/E, PINS is currently trading at 87.88x, which is significantly higher than the 20.67x industry average.
While PINS’ recent expansion of its Idea Pins across various countries should enable the company to inspire more users to join its platform, and thereby further fuel its brand image, we think its current valuation looks unjustified given the class action lawsuits filed against the company and its mixed financials. So, the stock’s near-term prospects look uncertain.