Pinterest, the visual discovery platform, has been labeled a buying opportunity for investors, as it continues to make progress in improving user engagement and monetization. Citi analyst Ronald Josey has upgraded Pinterest shares to buy/high risk, following his increased confidence in the company’s ability to turn its business around. While Pinterest’s performance has been lackluster this year, with an increase of only about 8%, compared to the S&P 500’s over 15% increase, Josey’s revised price target of $36, up from $31, suggests a potential upside of more than 37% from the previous day’s closing price. Consequently, Pinterest’s shares experienced a 4.2% surge in premarket trading the following day.
Josey supports his bullish perspective by arguing that Pinterest’s engagement levels are expected to continue to rise, thanks to its ads innovation and its full-funnel approach to advertising that can potentially lead to improved monetization trends. Additionally, the analyst points out that adj. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins have the potential to expand going forward. He emphasizes the positive impact of the company’s product investments in enhancing users’ experience, primarily through greater relevance and personalization of content across the platform. Josey admits that Pinterest’s comeback is still in its early stages; however, the company has set an “achievable guide” of mid- to high-teens revenue growth in the next three to five years.
Citi’s positive stance on Pinterest’s prospects was not limited to their firm. Another Wall Street company, D.A. Davidson, also upgraded its rating for Pinterest shares. After the latest analyst day, Tom Forte, an analyst at D.A. Davidson, raised his rating from neutral to buy and adjusted his price target to $35 from $25, indicating a potential increase of about 34% from the previous day’s closing price. Forte’s upgrade is primarily based on his confidence in management’s ability to reach the company’s financial targets. He identifies three key factors contributing to his optimism: increasing engagement, improving monetization in various geographic regions, and maintaining financial discipline while investing in growth and maintaining high margins.
Both Citi and D.A. Davidson analysts hold a bullish view on Pinterest’s future performance. They predict that the company’s ongoing efforts to enhance user engagement, improve monetization strategies, and expand into new markets will ultimately result in significant revenue growth and increased shareholder value. However, it is important to note that investing in high-growth companies always carries a certain level of risk, as future success may hinge on various external factors and market conditions. Nevertheless, with the analysts’ positive outlook and the potential upsides they highlight, Pinterest appears to be an attractive investment opportunity for those seeking exposure to the social media and e-commerce space. As with any investment decision, careful consideration and due diligence are essential before committing capital to any stock.