On Friday, CFRA, a financial research firm, upgraded its price target for Pinterest Inc (NYSE:PINS) shares to $45.00, up from the previous target of $34.00. The firm has maintained its Buy rating on the stock. The revision follows Pinterest's reported earnings per share (EPS) for the fourth quarter, which exceeded expectations at $0.53 compared to the $0.29 from the same quarter last year and surpassed the consensus estimate of $0.51.
Pinterest's sales increased by 12%, and the company has provided guidance for a 16% year-over-year growth in the first quarter, a figure that is slightly below market expectations. The growth is attributed to strong performance across various regions, with the United States seeing an 8% increase, Europe a 32% rise, and the rest of the world (ROW) experiencing a 27% uptick.
"We like accelerating MAU growth (up 11%), its fastest pace since '21, on international momentum and greater penetration among Gen Z users. We like emphasis on tight cost controls, supporting EBITDA growth of 86% and margin expansion (EBITDA margin of 37% vs. 22%)," said the analyst in a note.
Despite the robust user growth and cost efficiency, average revenue per user (ARPU) increased modestly by 2%, which CFRA suggests may be due to a shift in the user mix towards international markets. Nonetheless, video content continues to be a significant factor in Pinterest's growth strategy, now accounting for over 30% of revenue.
CFRA also notes the potential for the Pinterest and Amazon (NASDAQ:AMZN) advertising partnership to exceed expectations in the upcoming year and into 2025, which could lead to further upside in the company's financial estimates. The firm has accordingly raised its EPS estimates for Pinterest, setting the 2024 forecast at $1.34, up from $1.18, and the 2025 estimate at $1.65, an increase from the previous $1.58 projection.
InvestingPro Insights
Pinterest Inc (NYSE:PINS) has been the focus of investors following its impressive fourth-quarter earnings report. With CFRA's upgraded price target and maintained Buy rating, the company's financial health and future growth prospects are in the spotlight. Here's what real-time data from InvestingPro and InvestingPro Tips reveal about Pinterest's current financial position and future outlook:
InvestingPro data indicates a substantial market capitalization of $24.43 billion, reflecting investor confidence in the company's value. While the P/E ratio stands at a high -676.23, it's essential to note that the company's net income is expected to grow this year, which could potentially normalize this metric. Furthermore, Pinterest's revenue has shown a healthy increase over the last twelve months as of Q1 2023, with a growth rate of 6.46%, and a more significant quarterly growth rate of 11.49% in Q1 2023.
On the liquidity front, an InvestingPro Tip highlights that Pinterest holds more cash than debt on its balance sheet, which is a positive sign for financial stability. Additionally, the company's liquid assets exceed its short-term obligations, ensuring it can meet its immediate financial needs without strain.
InvestingPro Tips also reveal that despite not being profitable over the last twelve months, analysts predict Pinterest will become profitable this year. This optimism is mirrored in the company's stock performance, with a strong return over the last three months and a large price uptick over the last six months.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available, including insights on revenue valuation multiples and price/book multiples. With a total of 11 InvestingPro Tips listed for Pinterest, investors can gain a comprehensive understanding of the company's financial health and growth potential. To access these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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