Social media giant Pinterest (NYSE:PINS) stock disappointed investors with its second-quarter earnings results.

Subsequently, PINS stock shed nearly 20% of its value this month. However, the concerns surrounding its engagement headwinds are overblown and take away from the company’s monetization ability.

The unique element of Pinterest is that it can be used as a tool for both e-commerce and digital advertisement. This is perhaps why it should continue expanding its top-line growth and monetization efforts moving forward.

Investors are concerned about user maturation, and as a result, the stock has sold off recently. They seem to have turned a blind eye towards monetization, perhaps more important for top-line expansion.

PINS stock is trading at a 22% discount to its current price based on analyst estimates. Moreover, it’s trading at roughly 15 times forward sales, with 83% revenue growth on a year-over-year basis. That’s why PINS stock is trading cheaply and has an incredible growth runway ahead.

Second-Quarter Earnings

Pinterest’s second-quarter results have been the talk of the town. Though it beat on virtually every financial metric, investors were disappointed with its user growth figures.

Revenues rose 125% to $613.2 million, as the company swung to a net profit of $69.4 million from a loss of $100.75 million in the prior-year period.

Its global monthly active users (MAU) grew by an impressive 9% to $454 million versus expectations that it would hit $484 million. With fewer users, average revenue per user (ARPU) topped expectations by 13.8% at $1.32.

Investors haven’t taken kindly to the drop in the company’s MAU. With a growing user base, social media companies can effectively monetize more users over time. A decline in users suggests that the interest in the platform has peaked and there is limited upside.

Pinterest witnessed massive tailwinds during the pandemic that significantly boosted its MAU. The metric was at 335 million in the fourth quarter of 2019 and has grown by an astounding 35% in the next six quarters.

The company’s MAU has evidently dropped as those tailwinds have faded. Discretionary activity competition will continue to be weigh-in on Pinterest’s active user base.

I feel that its MAU metric will normalize and continue its upward trajectory for the foreseeable future.

A Focus on Monetization

It’s still early days for Pinterest in the monetization of its user base. It currently generates an ARPU of $1.32, which is peanuts considering what social media giants such as Facebook (NASDAQ:FB) generate.

Facebook generates seven times more ARPU than Pinterest at this time.

However, Pinterest has done incredibly well to expand its ARPU in the second quarter. ARPU rose by an incredible 89% on a year-over-year basis. It’s putting most of its efforts into monetizing its existing user base by rolling out features to establish it as a strong eCommerce player.

For instance, it has partnered with Shopify (NYSE:SHOP), enabling sellers to put their products onto Pins.

Catalog uploads have been a hit, and the company is testing a similar plug-in for its competitor in WooCommerce.

Moreover, the company is also developing a mechanism for advertisers to maximize their returns on ad spending. The automatic bidding tool will be effective in campaign budget optimization and thereby increasing paying users for the company.

Bottom Line on PINS Stock

PINS stock has sold off after disheartening investors with its second-quarter MAU figure. Pinterest’s MAU grew exponentially during the pandemic, and the slowdown in the pandemic-induced tailwinds was bound to have an impact on its userbase.

The figure should normalize and continue on an upward path in the future. More importantly, Pinterest is doing exceedingly well in monetizing its existing user base and has plenty of remaining upside.

PINS stock has loads of potential and is attractively priced at this time.

On the date of publication, Muslim Farooque 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.