When it comes to how a certain company moves on the markets, a note from a prominent analyst can either send investors flocking or shares tanking to new lows.
Pinterest (PINS), the social media platform most often used for resharing outfit inspiration and recipes, has been on a generally strong trajectory after pandemic-related use started dropping off significantly by 2022. In the last 12 months, shares rose by 41% to $27.84 despite a momentary drop in earnings after a first-quarter earnings report that fell well below Wall Street's expectations.
DON'T MISS: Maybe People Don't Actually Want to Buy Things on Pinterest
On June 28, Wells Fargo (WFC) analyst Ken Gawrelski upgraded Pinterest stock from a hold to an overweight (a more cautious buy) rating largely due to an Amazon (AMZN) partnership that will bring more ads to the platform. Lack of revenue growth (the platform is free to use and does not come with subscription tiers) was a major reason for the lower earnings and performance below the S&P 500 (^IN) .
Wells Fargo Note Sends Pinterest Stock Up
"Amazon partnership live ahead of 2023 holidays, improving engagement trends and higher ad load will allow PINS to deliver accelerating and above-consensus revenue growth," Gawrelski told investors in the Wednesday note. He further added the he sees the social media platform on a "strong catalyst path over next 6-12 months."
Not long after the note was sent, Pinterest shares surged by 5.42% to nearly $28. At its peak in February 2021, Pinterest stock was at $85.90 but fell to $18 by June 2022.
In the same note, Gawrelski raised the price target from $23 to $34 and said that he believes the partnership will allow Pinterest to outsource more of its monetization as well as improve engagement while also drawing in new users.
Wells Fargo's analysts predict a 10% increase in international revenue that could, if consistent, lead to 2% revenue growth by 2024. While $27 million in the first quarter of 2023, adjusted EBITDA could reach $577 and $835 million by 2023 and 2024.
E-Commerce And User Engagement Chart Positive Path For Pinterest
Compared to other social media platforms, Pinterest has often been seen as an underdog that will not go away — just when some analysts recommend giving up on it the platform sometimes dismissively referred to as "stay at home moms' social media" makes a resurgence.
"Pinterest isn't the only beaten-up tech stock that I think could deliver good returns in 2023," Eric Jhonsa wrote for TheStreet's Real Money in January 2023. "But I think it's fairly unique in terms of how many potential upside catalysts it has."
Former Google (GOOGL) commerce exec Bill Ready took over as Pinterest's chief executive in June 2022 and has also been on a mission to improve user engagement and overhaul payment services.
"As a platform that's used by people to discover products and assist with do-it-yourself projects, Pinterest lends itself well to both brand advertising and e-commerce," Todd Campbell wrote for TheStreet's Real Money earlier this year. "And with a third-quarter average revenue per user (ARPU) of just $1.56 ($6.12 in the U.S. and Canada, but just $0.72 in Europe and a mere $0.11 elsewhere), there's still a lot of headroom for Pinterest to grow its top line even if it doesn't see much user growth."
