On Friday, Evercore ISI maintained its optimistic stance on Pinterest Inc (NYSE:PINS), albeit with a reduced price target, now set at $45, down from the previous $48.
The adjustment comes after Pinterest reported mixed third-quarter earnings, which has led to a 10%+ decline in its stock price in after-hours trading for the second consecutive quarter. Investors are showing increased skepticism regarding the company's ability to achieve a 20% revenue growth target.
Pinterest's third-quarter revenue matched analyst expectations but indicated an 18% year-over-year growth, with forecasts suggesting a slight deceleration in the fourth quarter. Despite concerns about growth, Pinterest's profitability continues to impress, with projections of a record-high 27% EBITDA margin for fiscal year 2024.
The soft performance in the Food & Beverage advertising sector, which represents a significant portion of Pinterest's total revenue, was noted as a factor in the company's revenue growth challenges. Excluding this sector, Pinterest's revenue growth was reported in the low twenties percentage-wise. The company is also in the process of rolling out new product launches, which are expected to help accelerate revenue growth in 2025.
The competitive landscape for digital advertising dollars remains fierce, with major players like Google (NASDAQ:GOOGL), Meta (NASDAQ:META), Amazon (NASDAQ:AMZN), and Trade Desk (NASDAQ:TTD) dominating the market. Pinterest must demonstrate its value to marketers in this challenging environment.
Despite the current subdued sentiment, Evercore ISI highlights Pinterest's free cash flow multiple of 15X as an indicator of a potentially attractive risk-reward scenario, should the company's fundamental bullish case materialize. The firm reiterates its Outperform rating on Pinterest shares, signaling continued confidence in the company's potential.
In other recent news, Pinterest Inc. has reported fourth-quarter earnings per share at 40 cents, surpassing analyst estimates of 34 cents. Revenue for the same quarter was between $1.13 billion and $1.15 billion, aligning with analysts' average estimates.
Despite facing challenges in the food and beverage sector, the company's third-quarter earnings for 2024 demonstrated robust revenue growth trends, partially offset by an increase in lower-funnel advertising revenue.
Goldman Sachs recently adjusted its price target for Pinterest to $42 from the previous $46, while maintaining a Conviction Buy rating. The firm's analysis highlighted Pinterest's successful advertising revenue growth initiatives and commended the company's management for their cost discipline. Additionally, Deutsche Bank (ETR:DBKGn) reaffirmed its Buy rating, expressing optimism about Pinterest's revenue growth stability.
KeyBanc raised the stock price target for Pinterest to $45, citing significant growth potential. Piper Sandler maintained an Overweight rating on the company's shares, emphasizing the potential for high-teen growth rates and margin expansion. BofA Securities reiterated a Buy rating, highlighting the potential of Pinterest's ongoing integration of AI technology.
In a bid to return value to shareholders, Pinterest has launched a new stock buyback initiative authorizing up to $2 billion in repurchases. The company's recently launched Performance+ suite, aimed at refining user targeting, is still in its initial rollout phase. These are among the recent developments for Pinterest, demonstrating the company's commitment to enhancing its advertising products and expanding its market reach.
InvestingPro Insights
To complement Evercore ISI's analysis, recent data from InvestingPro sheds additional light on Pinterest's financial position and market performance. Despite the recent stock price decline, Pinterest has shown a strong 15.92% price return over the last three months, indicating resilience in investor confidence.
The company's revenue growth remains robust, with a 20.57% increase in the most recent quarter, aligning closely with Pinterest's target of 20% growth. This growth is supported by a healthy gross profit margin of 78.58%, showcasing Pinterest's ability to efficiently monetize its platform.
InvestingPro Tips highlight that Pinterest holds more cash than debt on its balance sheet, providing financial flexibility as it navigates the competitive digital advertising landscape. Additionally, the company's net income is expected to grow this year, which could help support its ambitious profitability targets.
For investors seeking a deeper understanding of Pinterest's potential, InvestingPro offers 12 additional tips, providing a comprehensive view of the company's financial health and market position.
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