Shares of Pinterest are still slowly fighting their way back after a rough couple of years for the social media player. But PINS stock has gained momentum in recent months, helped by an advertising partnership with Amazon and a push to drive more shopping on its platform.
Evercore ISI internet stock analyst Mark Mahaney recently named Pinterest as a top pick among the small-cap to midcap stocks he covers.
"We see PINS benefiting from clear evidence of digital ad spending at least stabilizing, and we see increasing evidence that the operational improvements new (Chief Executive) Bill Ready has implemented over the past year on both the consumer and advertiser side are bearing fruit," Mahaney wrote in a recent note to clients.
Still, PINS stock is down nearly 70% from a high just under 90 in February 2021. The company has been stung as the digital advertising market cooled from the red-hot levels at the start of the pandemic.
Further, Pinterest must show it can expand its base of users and manage rising costs that dinged its stock after a second-quarter earnings report last month.
PINS Stock: Teaming Up With Amazon
San Francisco-based Pinterest offers a digital pin board for users and primarily makes its money selling online advertising. Pinterest's 465 million users less often look to connect with friends or seek news, compared with other social networks. They may be "pinning" photos to help plan a home renovation or could pin content that appeals to their fashion sense.
Ready, the former leader of Google's commerce division, was named Pinterest's CEO in June 2022. He has focused on developing advertising partnerships and expanding shopping on the platform.
The company took a big step toward both goals earlier this year. Pinterest announced in April it had agreed to a multiyear partnership to bring ads from Amazon to Pinterest feeds. Ready said in a blog post that the deal fits Pinterest's "goal of making every Pin shoppable."
The deal could help Pinterest serve more effective ads across a wider range of topics. Amazon's advertising business generated $10.7 billion in revenue in the second quarter alone this year. Meanwhile, Pinterest had $2.8 billion in annual revenue in 2022.
The partnership can help bring a "depth and breadth of advertisers that is badly needed for Pinterest," Wells Fargo analyst Ken Gawrelski told Investor's Business Daily. Gawrelski upgraded PINS stock to overweight in June and currently holds a price target of 36.
Pinterest has begun testing Amazon ads on its platform, Ready said on the company's Aug. 1 earnings call. But Pinterest expects that the most meaningful revenue impact from the deal won't arrive until early next year.
Separately, Amazon said in a blog post last month that it had begun placing sponsored product ads on a list of partner sites that includes Pinterest. That offered another sign of progress for the partnership.
PINS Stock: Long-Promised Push Toward Shopping
"Engagement on Pinterest is very different than entertainment-driven social networks," Loop Capital analyst Rob Sanderson wrote in a recent note, maintaining a buy rating. "Users come looking for ideas and are very often looking to purchase something."
Sanderson added, "Conversion of Pinterest's uniquely high-intent traffic has been the bull story since the IPO." Pinterest's initial public offering took place in 2019.
Increasingly, Pinterest is utilizing artificial intelligence to surface shoppable recommendations for users. Last year the company acquired an AI-powered shopping platform called The Yes for an undisclosed price.
"One of the big things when I came in a year ago is that more than half of users on Pinterest say they are going to shop but the actionability on Pinterest is low," Ready said in an interview with CNBC after company's Aug. 1 earnings report. "We are bringing shoppable content onto Pinterest and finding it's really driving great engagement."
Stock Fell After Earnings Beat
PINS stock reached a 52-week high of 30.86 on July 18 after an upgrade to buy from Evercore ISI's Mahaney.
Then Pinterest reported earnings that topped Wall Street's expectations with a 6% rise in revenue, to $708 million. Adjusted earnings were 21 cents per share. But PINS stock fell by about 3% amid concerns about the company's 11% increase in expenses, to $781 million.
Since retreating from its 52-week high, PINS stock has settled into a cup base with a pivot point of 30.86.
As of Wednesday's market close, PINS stock had rallied 34.2% from a low point for the year in early May. Shares have climbed to a best-possible 99 IBD Composite Rating, according to IBD Stock Checkup. The score combines five key technical and fundamental ratings to help identify growth stocks.
Pinterest will host a conference for its advertisers on Tuesday. A week later, company officials are hosting an investors' day in San Francisco. Analysts will be looking for updates on the rollout of Pinterest's Amazon partnership, its AI efforts and any further product updates.
PINS Stock: What To Watch
PINS stock has picked up analyst support. Just under half of the 33 analysts covering Pinterest rate it as a buy or overweight, according to FactSet. That's up from just 30% who held that rating a year ago.
Wedbush analyst Scott Devitt initiated Pinterest coverage last month with a neutral rating.
He noted in his initiating report that the platform has expanded its ad product formats. It also is investing in improving monetization, he says. But Devitt believes Pinterest must show it can expand its overall market and stand up to competition from global leaders such as Alphabet and Meta.
"(Pinterest) has a good setup in the short and intermediate term with the Amazon ad integration," Devitt told IBD. "Longer term, they will have to fight through those perception questions."
