During the height of the pandemic, Pinterest (NYSE:PINS) grew into one of the hottest social media apps. As governments restricted outside activities, consumers increased their time in digital spaces. But as mass-produced vaccines hit markets, folks opened their doors to the world.

The result? Pinterest’s pandemic-based monthly active user (MAU) growth stalled Stateside. Take the social media company’s second-quarter earnings report: user growth slowed by 5%. The stock price of PINS is plunging, of course, with good reason.

But here’s the million-dollar question: Should you buy Pinterest or is PINS a falling knife?

Before we make our investment recommendation, let’s return to Pinterest’s Q2 earnings report:

The backstory here sets the stage. Up until now, Pinterest’s U.S. MAUs pulled off several quarters of double-digit growth. The print shows many quarters of 10 million new users adds against their year-ago periods.

In Q2, the story takes a downward spiral. Pinterest reported U.S. user losses of over 20 million users. Through July 27, while facing “engagement headwinds,” Pinterest’s U.S. MAUs plunged by 7%. Global MAUs, though, grew by 5% year-over-year.

So what gives? Is this a bearish trend suggesting the best is now behind PINS stock? Or is it a minor setback disguising a massive buying opportunity? There’s no doubt in my mind that it’s the latter. Ockam’s razor — The simplest explanation is often the best one.

With lockdowns, users spent countless hours being creative on Pinterest. With vaccinations, users unleashed their pent-up demand by venturing into the world. Pinterest’s slowdown in user growth spooked investors, who sold PINS stock to the tune of 18%.

We’re not worried about this Pinterest stock selloff, which is a decision backed by data. We’ll continue to hold PINS for its durable long-term potential.

Long-Term Potential for PINS Stock

In 2020, Pinterest had a huge pull-forward of demand. That’s showing up now in its slower-than-normal 2021 numbers.

But the long-term user growth trend here remains healthy. We remain optimistic that Pinterest will get back on track soon enough.

By 2022, expect the social media company to add about 50 million new users yearly. That’s doable, considering Pinterest’s history of user-growth outperformance.

I have plenty of reasons to be bullish PINS stock in my premium investing newsletter, Innovation Investor. But the main driver I’ll list here should be enough to highlight just how much of a bargain this rout is:

Should You Buy PINS Stock: We’re still bullish on management’s pivot toward publishing tools for content creators. Pinterest’s business model depends on engagement. Its initiatives here will create a stickier user base. And app users will heavily engage with creatives on Pinterest’s platform. Some users will use Pinterest for one-off events, sure; such as planning weddings, redesigning homes or planning parties. But regular usage on the social app should increase in value. Just don’t expect a repeat occurrence of the pull-forward dynamic Pinterest just experienced.

On balance, where does that leave us with regard to buying Pinterest? Let me knock the cobwebs out of my brain with a quick summary:

My concession: PINS stock deserves a beating.

My caveat: PINS stock doesn’t deserve to trade roughly 20% lower. That’s purely overdone.

My recommendation: We’re staying the course with PINS stock. If you need a reasonably valued, highly engaged social media stock in your portfolio, you could do a lot worse than buying Pinterest’s stock.

— Luke Lango and the InvestorPlace Research Staff

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Source: Investor Place