Pinterest (NYSE:PINS) shares rose about 1% in early New York trading on Monday after a prominent research firm initiated positive research coverage.
New Street Research analysts introduced Pinterest as a new Top SMID Cap Pick today after initiating coverage with a Buy rating and a Street-high $48 per share price target.
The analysts argue that near-term adjusted EBITDA consensus has upside while long-term guidance is seen as “conservative.”
“Most investors are focused on the new AMZN third-party ad partnership in the U.S., and the potential expansion to new partners and countries. However, we believe the Street is overlooking structural leverage on sales expenses as 3P ad revenue grows as a % of revenue,” the analysts said.
“Our Buy rating is underpinned by above consensus adjusted EBITDA estimates driven by this phenomenon.”
For this quarter, the analysts are $3 million ahead of consensus for adjusted Ebitda, while the gap widens to $23 million for 2024 and as much as $150 million for the fiscal year of 2028.
“We believe PINS can hit its low 30% adjusted EBITDA margin target early in its 2026- 2028 targeted range. We are broadly inline with consensus revenue, but the combination of 3P ad revenue growth + associated sales leverage drive our above-consensus adjusted EBITDA estimates,” they concluded.
PINS shares are up 30.4% year-to-date through Friday’s close.