Oppenheimer Analysts Begin Coverage of Pinterest with “Outperform” Rating

Investing experts believe that despite having the smallest daily active user base among social media platforms, Pinterest has significant growth potential due to its engagement levels and advertising capabilities.

In a recent client report, analysts from Oppenheimer highlighted Pinterest’s rapid growth in digital advertising, positioned just behind Instagram’s parent company. The platform specializes in pinboards that inspire users with ideas ranging from recipes to wedding planning, attracting high-intent users who are actively searching for products and inspiration. This makes Pinterest particularly effective for direct response advertising.

The analysts began their coverage of Pinterest with an “Outperform” rating, setting a target share price of $45. They pointed out that advertisements on the platform enhance user engagement, which in turn attracts more advertisers, improves data quality, increases the user base, and raises ad pricing. Notably, over half of Pinterest users view it as a shopping destination, with 96% of searches being unbranded, indicating a diverse inventory.

Earlier this year, Pinterest’s stock saw a drop of approximately 15% after the company’s revenue forecasts for the third quarter fell short of Wall Street’s projections. The company anticipates generating between $885 million and $900 million in sales for that quarter, which is below the expected $907 million.

On a positive note, Pinterest reported 522 million global monthly active users in the second quarter, surpassing analysts’ expectations, and the average revenue per user of $1.64 met estimates. During an earnings call, CFO Julia Donnelly mentioned that more advanced advertisers were increasingly using the platform, although she acknowledged that broader economic challenges were impacting ad spending in the food and beverage sector. Overall, executives at Pinterest expressed that the advertising market appeared “relatively stable” in the recent quarter.