Pinterest stock received a significant boost on Tuesday from Evercore ISI, which has turned bullish on the social media company’s shares. The company’s rating on Pinterest has been upgraded from In Line to Outperform by analyst Mark Mahaney. He has also set a new target price of $41, indicating a potential upside of more than 30% from its current value of $30.22.
While Pinterest shares have already seen a growth of 23% this year, they have been overshadowed by the notably larger gains of other social media players such as Meta, which has surged by 158%, and Snap, which is up by 50%.
Mahaney’s decision to revise his rating on Pinterest stems from four key reasons. Firstly, he highlights the “clear evidence of digital ad spend stabilizing” as the industry moves away from the trough levels experienced in late 2022. This indicates a promising recovery in the second half of 2023.
Previously, Mahaney’s concerns were centered around the potential negative impact on Pinterest as a second-tier ad platform due to the consolidation of ad budgets on Alphabet’s Google and Meta. However, it seems that recent developments have dispelled those worries.
Pinterest: Strong Leadership and Positive Outlook
The appointment of Bill Ready as the new CEO of Pinterest in June 2022 is starting to show promising results, with increasing evidence of operational improvements. Monthly average users are once again on the rise, thanks in part to a series of product enhancements.
Analyst Mark Mahaney highlights three key observations that suggest a fundamental turning point for the company. Firstly, he anticipates significant revenue growth and margin expansion over the next two to four quarters, which could lead to a revaluation of Pinterest shares.
Secondly, Mahaney views the stock’s current valuation as reasonable, with a price-to-earnings ratio of approximately 27 times expected 2024 Ebitda and 21 times estimated 2025 Ebitda. He emphasizes the potential for Ebitda growth of 30% or more, along with Pinterest’s consistent history of generating free cash flow.
Additionally, Mahaney notes the upcoming investor day hosted by Pinterest this fall, which will be the first under Ready’s leadership. He believes this event holds promise as a positive catalyst for Pinterest’s stock performance.
Exciting times lie ahead for Pinterest as Bill Ready spearheads the company’s growth and innovation. Stay connected for the latest updates.
Writer: Eric J. Savitz
