On Thursday, Pinterest Inc (NYSE:PINS) saw its price target increased to $52.00 from $50.00 by Piper Sandler, while the firm retained an Overweight rating on the stock. The revision comes as the analyst firm reaffirms its confidence in Pinterest, highlighting the company as their top SMID (Small to Mid-size) pick.
The analyst's positive outlook for Pinterest is based on a new analytical model that evaluates the company's SG&A (Selling, General, and Administrative Expenses) spending across approximately seven of its core business verticals. This model, which shows a high correlation with the performance of around 60 companies, indicates that Pinterest's revenue growth is not merely a result of market improvements, which accounted for about 0.60% of the first-quarter revenue acceleration. Instead, Pinterest's revenue surge, which was 11% higher than the market's, is seen as an outperformance and a sign of the company's increasing market share capture.
Further bolstering the analyst's optimistic stance is the observed traffic increase between Pinterest and Amazon (NASDAQ:AMZN), suggesting a strengthening partnership. In April, traffic between the two platforms jumped by 147% year-over-year.
This is in conjunction with a notable shift in advertising metrics, where Pinterest's Cost per Thousand Impressions (CPMs) showed a year-over-year decline for the first time since November, while Cost per Click (CPCs) continued to be approximately 60% lower year-over-year.
The analyst also referenced last week's findings on the usage of Pinterest and Google (NASDAQ:GOOGL) Search, which were considered constructive for Pinterest's outlook. Additionally, an analysis of Amazon's advertising mix for a sample search in April indicated a slight decrease, which could be relevant to Pinterest's advertising strategy and performance.
InvestingPro Insights
As Pinterest Inc (NYSE:PINS) continues to capture market share and strengthen strategic partnerships, real-time financial metrics from InvestingPro provide a deeper understanding of the company's valuation and performance. Pinterest holds a substantial market cap of 28.27 billion USD, reflecting its significant presence in the industry. With an adjusted P/E ratio of 109.88 as of Q1 2024, the company trades at a high earnings multiple, indicating investor confidence in its future growth potential. This confidence is further supported by a robust gross profit margin of 78.11%, showcasing Pinterest's ability to maintain profitability.
InvestingPro Tips highlight that Pinterest is expected to see net income growth this year, with 15 analysts revising their earnings upwards for the upcoming period. This aligns with the positive sentiment expressed by Piper Sandler in their recent price target increase. Furthermore, Pinterest's liquid assets exceed short-term obligations, providing financial stability and flexibility. For readers looking to delve deeper into Pinterest's financial health and future prospects, there are additional InvestingPro Tips available, such as insights into the company's revenue valuation multiple and its trading position near a 52-week high.
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