Pinterest stock jumped Monday after Wedbush analysts upgraded their view of the social media stock to outperform from neutral. The stock is gaining back some ground after a post-earnings sell-off that the analysts described as overdone.
"We think the company is executing well against its user engagement and monetization strategies, and remains on pace to deliver growth and profits in line with its multi-year guidance framework," Wedbush analyst Scott Devitt wrote to clients Monday.
A team of Wedbush analysts led by Devitt set a 12-month price target of 38 for Pinterest stock, implying 30% upside from the company's closing price of 29.18 on Friday.
On the stock market today, Pinterest stock is up more than 4% at 30.49 in recent action.
Pinterest Q3 Earnings Disappointment
Pinterest stock is opening this week on a positive note after a rough trading day Friday. Shares sank 14% despite an earnings report that beat for both top and bottom line growth.
Pinterest offered fourth quarter sales guidance that implied 15% to 17% growth, leaving some investors uneasy about the company's upside against its previous long-term guidance for "mid-to-high teens" revenue growth over the next three to five years.
In upgrading the stock, Devitt called that reaction "overdone." Pinterest is projected to grow its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) at a roughly 27% compound annual growth rate for the next three years, he noted.
"Our assumptions are in line with the company's guidance framework and we see a number of drivers supporting monetization improvements over the intermediate term," Devitt wrote.
That includes, he added, the company scaling up advertising partnerships with Amazon and Google parent Alphabet. Pinterest is also introducing new advertising tools and formats. That includes a product called Performance Plus, with automated tools for developing ad campaigns.
"Expectations have been lowered further following 3Q results, and we believe the downside risk to results is limited from here," Devitt wrote. "We think investors should take advantage of this period of relative weakness, given a more attractive risk/reward in our view for a platform with considerable monetization potential ahead."
Pinterest Stock Down 16.5% This Year
Pinterest stock is down 16.5% this year, compared to a 26% gain for the S&P 500. That's despite Pinterest kicking off the year with a 21% rally through June. Shares tumbled on a Q2 results disappointed in July and had yet to recover above Pinterest's 200-day moving average before this latest sell-off.
Still, the Wedbush report continues a trend in the past year of analysts turning bullish on Pinterest. As recently as August 2023, less than half of the analysts following Pinterest rated the stock a buy. As of Monday, Pinterest stock now has buy ratings from 77% of the 39 analysts tracking the stock, according to FactSet.
According to IBD Stock Checkup, Pinterest stock holds an IBD Composite Rating of 63 out of a best-possible 99. The Composite score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Pinterest has a very strong EPS Rating of 97 out of a best-possible 99. The EPS Rating takes into account the growth and stability of a company's earnings over the past three years, with extra weighting put on the most recent two quarters.
On the other hand, Pinterest's Relative Strength Rating is a meager 16 out of 99. The RS Rating means that Pinterest has outperformed less than 16% of all stocks in IBD's database over the past year.
