Investing.com -- Pinterest (NYSE:PINS) has the smallest daily active user base among social media companies, but there is "upside" to the company stemming from engagement and advertising on the platform, according to analysts at Oppenheimer.
In a note to clients on Tuesday, the analysts noted that Pinterest, which is known for its pinboards designed to spark ideas on everything from recipes to weddings, has the fastest-growing digital advertising offering outside of Instagram-owner Meta Platforms (NASDAQ:META).
"Pinterest operates a global discovery platform with high-intent users in search of products and inspiration, lending itself well to direct response advertising. Relevant ads improve the core user experience, like magazines, driving strong advertiser [return on investment]," the Oppenheimer analysts wrote.
They initiated their coverage of the firm with an "Outperform" rating and a share price target of $45.
"Ads drive increased engagement, which brings more advertisers, better data, more users, and higher ad pricing. More than half of users think of Pinterest as a place to shop, and 96% of searches are unbranded (e.g., “red dress”) further indicating access to unique inventory," the Oppenheimer analysts said.
In July, Pinterest's stock price tumbled by around 15% after the company's third-quarter revenue guidance missed Wall Street expectations. The business said it now expects to post sales of $885 million to $900 million during the period, below estimates of roughly $907 million.
However, Pinterest said it had 522 million global monthly active users in the second quarter, above analysts' forecasts, while quarterly average revenue per person of $1.64 met estimates.
Speaking in a post-earnings call, Chief Financial Officer Julia Donnelly noted that Pinterest's "more sophisticated advertisers continue to lean into the platform," although she flagged "broader headwinds" are weighing on ad spending by food and beverage groups.
In general, however, Pinterest executives said the market for advertising was "relatively stable" in the second quarter.