Pinterest stock gained Monday after analysts with Morgan Stanley upgraded their view of the social media company to a buy-equivalent rating. Shares are approaching a buy point from a long double-bottom base.
Morgan Stanley analyst Brian Nowak said Pinterest's AI investments are boosting the digital pinboard operator's advertising business. He upgraded his view to overweight from equal weight in a client note Monday.
"We have been monitoring Pinterest's GPU-enabled investments and budding engagement and monetization improvements for multiple quarters," Nowak wrote. "Heading into 2H, we are turning positive as we think the benefits of these investments are set to drive underappreciated acceleration and earnings power."
GPU refers to the graphics processing units that power AI applications. Nowak said that industry commentary indicates Pinterest's investment in "GPU-enabled innovation" is boosting advertising efficiency and relevancy.
Late last year, Pinterest launched its Pinterest Performance+ suite of products, which the company said help advertisers by optimizing user targeting and managing budgets.
"Our ability to leverage AI to personalize our users' experience is a key differentiator and has enabled us to find our best product-market fit in years," Pinterest Chief Executive Bill Ready said on the company's Q1 earnings call in May.
Nowak said the investments in that product are paying off. He set a price target of 45 for Pinterest stock, which still implies a discounted valuation compared to industry peers like Snap, Nowak wrote.
The note comes as Pinterest's much-larger rival Meta Platforms is capturing attention for its all-out push into AI. Both firms are using the technology to make it easier for advertisers to launch and target campaigns. Nowak also raised his price target for Meta stock to 750 from 650, citing "GPU-enabled machine learning driving higher engagement and monetization" for the Facebook parent company.
Pinterest Stock: Double-Bottom Base
On the stock market today, Pinterest stock is up more than 3% at 38.42 in recent action. Meta stock is up 1% at 714.10.
Pinterest stock is ahead 28% overall year to date, though its performance has been uneven. Shares jumped out to a big gain for the year after Pinterest's fourth quarter results impressed investors in February.
But the stock slumped in the spring as investors fretted over the impact of tariffs on the digital advertising market. But Pinterest in early May published Q1 results that helped restart the stock's momentum. The company showed stronger-than-expected sales, plus Pinterest offered an upbeat revenue forecast despite the tariff uncertainty.
That same month, President Donald Trump announced a deal with China to lower tariffs on imported goods.
Pinterest stock has rallied more than 50% since the beginning of May.
The action has Pinterest trading within a double-bottom base that has a buy point of 40.90, according to IBD MarketSurge. That represents the stock's 2025 high. Shares are also chasing a two-year high of 45.19 from June 2024.
Meanwhile, Pinterest stock has an IBD Composite Rating of 97 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
That is good for second-place in the Internet-Content industry group tracked by IBD. Meta stock ranks fourth.
Pinterest will report second-quarter earnings on Aug. 7.
