Shares of Pinterest Inc. could be headed for their best one-day performance in more than a year after the company, which lets people collect inspirational ideas, struck a more upbeat tone than social-media peers despite the uncertain macroeconomic environment.
Pinterest’s stock
PINS,
was ahead 18.8% in premarket trading Tuesday following the latest earnings report. The stock hasn’t logged a regular-session gain above 18% since June 30, 2021, when it rose 20.9%.
See more: Pinterest stock jumps despite earnings miss, as Elliott confirms stake and users stick around
Wells Fargo’s Brian Fitzgerald saw various bullish signals surrounding Pinterest’s second-quarter report, including Elliott Management’s activist support of the company, predictions for a more moderate pace of investments next year, and the expectation that global monthly active users could get back to more traditional seasonal growth patterns in the second half of the year.
“While we believe some investors remain skeptical of PINS’ Idea Pins content strategy, we see an emerging content consumption/creation flywheel and think PINS is making the right moves to drive engagement while continuing to refine relevance and shopping tools,” Fitzgerald wrote, referring to the company’s offering that lets users post multi-page videos.
Fitzgerald has an overweight rating on Pinterest’s stock, though he lowered his target price to $34 from $37.
Baird analyst Colin Sebastian wrote that Pinterest’s third-quarter revenue outlook, which called for a mid-single-digit year-over-year growth rate, suggests the company might be in a different spot than pure social-media companies like Snap Inc.
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and Twitter Inc.
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Some analysts think Snap and Twitter could post negative revenue growth in the current quarter.
Read: Why Snap’s pain may not be over yet
“Pinterest’s Q2 results and Q3 guidance support the idea that Pinterest occupies a unique position between Search and Social, facing revenue headwinds not quite as severe as META/SNAP/TWTR, but perhaps not quite as resilient as Google Search,” he wrote. Sebastian rates the shares at outperform with a $30 price target.
Barclays analyst Ross Sandler agreed that Pinterest’s forecast was “one of the better trajectories we’ve seen” which, “given the heavy exposure to problematic retailers, suggests that PINS is a bit stickier for marketers than what we are seeing elsewhere.”
While Sandler was upbeat that Pinterest’s “pace of execution could improve over coming quarters,” he remains on the sidelines, writing that he still has “obvious concerns around the overall macro in digital advertising.” Sandler rates Pinterest’s stock at equal weight, though he lifted his price target to $23 from $20.
RBC Capital Markets analyst Brad Erickson wrote that activist involvement from Elliott Management and a strong “vigor” from Pinterest’s new management team helped drive the sharp rise in Pinterest’s stock, though he, too, wasn’t yet ready to jump on the bull train.
“Street estimates decline meaningfully but the narrative is improving, user engagement trends are stabilizing, new content initiatives are progressing, and ad dollars are proving stickier than peers,” Erickson wrote. “While the move after-hours is well warranted, in our view, we believe the stock will quickly bake in elevated growth expectations that the shares may have to grow into. We’re intrigued by PINS and look for further evidence of content driving incremental engagement if we’re to get more constructive.”
He rates the stock at sector perform with a $23 price target.
Evercore ISI’s Mark Mahaney took a similar view, writing that Pinterest “appears committed to improving user engagement, dramatically improving monetization, and growing its user base” under newly named Chief Executive Bill Ready, though he had questions about how much potential lies ahead, especially on the user front.
Pinterest reported 433 million monthly active users for the second quarter, flat relative to the first quarter.
“What keeps us on the sidelines with this growth valuation…is uncertainty as to how/whether Pinterest can meaningfully grow its user base from here,” Mahaney wrote. “How many engaged Pinners are there five years from now — 500MM, 750MM, 1B? The stock would imply something closer to 500MM, and that’s where we are too. But we are wide open to the potential for upside.”
Meanwhile, Pinterest faces challenges related to the macroeconomic climate, competition, and algorithm changes from Alphabet Inc.’s
GOOG,
GOOGL,
Google, all reasons why Mahaney is keeping “a respectful in-line rating” on Pinterest shares, though he upped his price target to $28 from $24 in his latest note to clients.
