(Bloomberg) -- Pinterest Inc. is slowly digging itself out of the hole that social media stocks find themselves in, leaving the owners of Facebook and Snapchat behind thanks to its greater reliance on search-driven advertising.

Shares in the digital pin-board platform have risen 34% from a two-year low in mid-June, as analysts note improving growth in the number of users on the site, as well as how much they’re interacting with content there. In the same period, Facebook parent Meta Platforms Inc. has tumbled 22% and Snap Inc. slipped 12%, through Wednesday’s close.  

Facebook and Snapchat rely more on targeting ads to users based on their activity on the site, a model that has become less effective following changes put in place by Apple Inc. last year on its iPhones for privacy reasons. Alphabet Inc.’s Google and Pinterest, meanwhile, are able to serve more ads linked to searches that users have done on the platforms. 

“Pinterest has been sitting out there with a lovely cash-flow-positive business and it is grinding out double-digit growth year after year,” said Robert Cantwell, who owns the stock in the actively managed Compound Kings ETF that he runs. “It is a disruptive asset with incredibly high margins, and when it hit a $12 billion valuation earlier this year, it started to look incredibly cheap.” 

One advantage the site has over rivals is that users often visit it with shopping in mind. Someone who’s say, renovating a kitchen and is searching for design ideas can be served ads for wall tiles or cabinetry. Pinterest has worked in recent years to help advertisers and retailers sell products directly on the site.

That interest in shopping is a unique element of the platform, said Eric Sheridan, an analyst at Goldman Sachs Group Inc., who raised his rating on the stock last week, citing improving user growth and better engagement trends.

Even after the rally from the lows, Pinterest shares are down 37% this year, and it’s still the smallest of the major social media companies, with a market value of $15.5 billion. The stock has been buoyed by occasional bouts of speculation that it will attract a buyout offer. 

The shares surged in August after the company reported resilient user numbers and activist investor Elliott Investment Management confirmed a major stake. Elliott said then that Pinterest has “significant potential for growth” and it supports new Chief Executive Officer Bill Ready. 

“The market is convinced that Pinterest cannot exist a stand-alone business and will be taken out at a premium,” said Tejas Dessai, analyst at Global X, a manager of the Global X Social Media ETF. “The likelihood of a deal could become much higher” if the company reports weak third-quarter results and gives disappointing guidance for the holiday quarter, he said. 

While the stock may have looked attractive at a $12 billion market value this year, the San Francisco-based company is no longer cheap relative to other social media companies. It trades trades at 4.9 times projected sales, compared to 3.3 times at Snap and 2.7 times for Meta, according to Bloomberg data. 

It’s not been easy year for a sector dependent heavily on online advertising, with a combination of headwinds weighing on the stocks over the past year: Apple’s software update has made targeting ads tougher, competition from new entrants like TikTok is on the rise and now fears of a looming recession are pressuring ad budgets.

The worsening environment have led analysts to slash their estimates multiple times this year. Over the past six months the average estimate for this year’s adjusted earnings per share has fallen by 42% and the revenue forecast has dropped by 10%, according to Bloomberg data. Still, the company is forecast to post 9% revenue growth this year and a 17% increase in 2023.

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The selloff this year that has pushed the Nasdaq 100 Index down by 34% has resulted in the evaporation of $6.5 trillion of market value for the companies in the tech-heavy gauge. There are now only 22 components of the benchmark with equity capitalizations of more than $100 billion, down from 34 at the end of last year. The Nasdaq 100 slipped 3% after the latest reading on inflation.

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(Updates to market open.)

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