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On Monday, Deutsche Bank reaffirmed its Buy rating on Pinterest Inc (NYSE:PINS), with a steady price target of $43.00. The financial institution anticipates Pinterest to unveil its third-quarter results after the market closes on Thursday, November 7th.
Despite the company's revenue guidance falling short of analyst expectations by one percentage point, leading to a 14% drop in stock value, Deutsche Bank remains optimistic about Pinterest's revenue growth stability.
The bank asserts that Pinterest's mobile deep linking and direct links, along with expanding partnerships with Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL), will contribute to a more stable revenue growth compared to current market expectations. Additionally, recent checks in the advertising market indicate a potential acceleration in Pinterest's revenue growth for the fourth quarter of 2024.
Deutsche Bank forecasts a $900 million revenue for Pinterest in the third quarter, marking an 18% year-over-year increase, or 19% on a constant currency basis. This estimate aligns with consensus and sits at the upper end of the company's guidance, bolstered by the effectiveness of mobile deep links and direct links for advertisers.
Investor expectations are seen as reasonable, with current estimates providing an adequate benchmark for the third quarter's performance.
The bank also anticipates that Pinterest's management will address the company's long-term growth prospects, highlighting the impact of its partnerships with Amazon and Google and elaborating on international monetization strategies. For the fourth quarter, expectations are set for approximately 18-19% year-over-year revenue growth on a constant currency basis, suggesting no acceleration from third-quarter projections.
In terms of expenses, Deutsche Bank expects third-quarter adjusted operating expenses to reach $499 million, slightly above the guide's midpoint and consensus. The third-quarter EBITDA estimate stands at $225 million, in line with market expectations.
The bank will be paying close attention to further details on the contribution of deep links, CAPI adoption, Performance+ progress, and international monetization efforts. Deutsche Bank's price target of $43 is based on a 17x multiple of the projected FY26 adjusted EBITDA of $1.64 billion.
In other recent news, Pinterest Inc. has been the subject of several positive analyst reviews. KeyBanc raised the stock price target for Pinterest to $45, citing significant growth potential ahead of its earnings report. This optimism is attributed to beneficial foreign exchange rates, strong user engagement, and upcoming product developments like Performance+, which is expected to spur sustained growth.
Analysts from Piper Sandler and BofA Securities have also maintained positive ratings on Pinterest, highlighting the company's high-teen growth rates, margin expansion, and the potential of its affluent user base.
In addition, Pinterest has made strides in expanding its operations. The third quarter of 2024 is projected to be the first complete quarter to reflect the revenue impact of the company's expansion efforts, which included the monetization of approximately 30 new countries through Google's platform. Pinterest's referral traffic from Amazon showed a significant increase in September, surging 148% year-over-year.
Moreover, the company's recent global advertising event, Pinterest Presents, showcased the platform's advancements and potential for sustained growth in user base, engagement, and monetization. New developments such as the Performance+ suite, a collection of AI and automation tools, a new Return on Ad Spend (ROAS) bidding solution, and a Promotion feature were introduced.
Other notable developments include CAPI Connect, an advertising expansion to 30 new countries, and a catalog upload tool currently under development. These recent developments underscore Pinterest's commitment to enhancing its advertising products and expanding its market reach.
InvestingPro Insights
To complement Deutsche Bank's analysis, recent data from InvestingPro provides additional context for Pinterest's financial position. The company's market capitalization stands at $22.77 billion, reflecting its significant presence in the social media landscape. Pinterest's revenue for the last twelve months as of Q2 2024 reached $3.34 billion, with a notable revenue growth of 16.22% over the same period.
InvestingPro Tips highlight Pinterest's strong financial health, noting that the company "holds more cash than debt on its balance sheet" and that "liquid assets exceed short-term obligations." These factors align with Deutsche Bank's optimistic outlook on Pinterest's stability and growth potential.
Moreover, Pinterest's profitability is underscored by an InvestingPro Tip indicating that the company has been "profitable over the last twelve months." This is further supported by the data showing a gross profit margin of 78.58% for the last twelve months as of Q2 2024, demonstrating Pinterest's ability to maintain high margins in its operations.
For investors seeking a deeper understanding of Pinterest's financial metrics and growth prospects, InvestingPro offers 11 additional tips, providing a comprehensive view of the company's market position and potential.
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