On Monday, Wedbush made a positive adjustment to Pinterest Inc 's (NYSE:PINS) stock rating, raising it from Neutral to Outperform. The financial firm also established a new price target for Pinterest shares at $38.00. The upgrade reflects confidence in Pinterest's current trajectory toward growth and profitability, aligning with the company's multi-year guidance framework.
The analyst from Wedbush highlighted that Pinterest is performing well in terms of user engagement and monetization strategies. Despite the market's reaction to Pinterest's third-quarter results, which the analyst believes was exaggerated, the company's shares are currently trading at approximately 11.6 times Wedbush's 2026 adjusted EBITDA estimate. This valuation comes as Pinterest is expected to grow its adjusted EBITDA at a compound annual growth rate of about 27% over the next three years.
Wedbush's adjusted expectations are consistent with Pinterest's own guidance framework. Several factors are anticipated to support improvements in monetization over the intermediate term. These include the expansion of third-party demand partnerships with major players like Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL), the introduction of new advertising surfaces and formats, the continued adoption of advertising tools that drive stronger conversion rates and visibility for advertisers, and ongoing collaboration with resellers in markets where Pinterest is currently undermonetized.
The outlook for Pinterest is favorable, with the company poised to continue its growth trajectory. The Wedbush analyst's statement underscores a belief in the strength of Pinterest's business model and its potential for sustained financial performance in the coming years. The new price target of $38.00 suggests that Wedbush sees significant upside potential for Pinterest's stock.
In other recent news, Pinterest Inc. experienced robust growth in Q3 2024, with an 18% year-over-year revenue increase to $898 million, as well as an 11% rise in global monthly active users, now standing at 537 million. Despite these positive developments, BMO Capital Markets has adjusted its outlook on Pinterest, reducing the price target to $40 from the previous $46 due to concerns over increased costs for research and development headcount and infrastructure. These strategic investments, however, are anticipated to enhance Pinterest's content ranking and recommendation systems for users and advertisers over the long term.
The launch timing of Pinterest's Performance+, an AI-driven tool for optimizing advertising, could potentially defer advertising revenue to the second half of 2025 as advertisers engage in A/B testing. BMO Capital has revised their projections for Pinterest's EBITDA margins, expecting a margin of 27.5% for the year 2025 and 30% for 2026, a decrease from the previous estimates.
For Q4 2024, Pinterest anticipates revenue between $1.125 billion and $1.145 billion, with non-GAAP operating expenses ranging between $495 million and $510 million. The company also announced a new $2 billion share repurchase program. These are some of the recent developments in Pinterest's strategic investments and their impact on future profitability and growth.
InvestingPro Insights
To complement the positive outlook presented by Wedbush, recent data from InvestingPro offers additional insights into Pinterest's financial position. As of the last twelve months ending Q3 2024, Pinterest reported a revenue of $3.47 billion, with a notable revenue growth of 17.7%. This aligns with Wedbush's confidence in the company's growth trajectory.
InvestingPro Tips highlight that Pinterest holds more cash than debt on its balance sheet, indicating a strong financial position. This solid foundation could support the company's expansion plans and monetization strategies mentioned in the article. Additionally, 15 analysts have revised their earnings upwards for the upcoming period, which corroborates Wedbush's optimistic stance.
It's worth noting that Pinterest's stock has taken a significant hit over the last week, with a 1-week price total return of -9.6%. This recent dip might present an opportunity for investors who share Wedbush's bullish outlook. The current price of $29.18 is well below both the analyst fair value target of $39.91 and InvestingPro's fair value estimate of $36.59, suggesting potential upside.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips on Pinterest, providing a deeper understanding of the company's financial health and market position.
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