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Pinterest (NYSE:PINS) was initiated at investment firm Jefferies on Wednesday with a Hold rating as the stock already trades at a premium to other social networks.
The firm sees Pinterest (PINS) as having an “improving position as a commerce-focused ad platform,” resulting in an increase in revenue, coming in-line with targets over the next several years.
“However, PINS already trades at a 10% premium to Meta (NASDAQ:META) on a growth adjusted basis despite our expectation that the company could struggle with diversifying its advertiser base and sustainably growing engagement,” analysts James Heaney and Brent Thill wrote in a note.
Jefferies set a price target of $30, compared to the average analyst estimate of $32.83. Pinterest (PINS) shares fell 3.4% on Wednesday.
Pinterest (PINS) is different from rivals Meta Platforms (META) and Google’s YouTube (GOOG) (GOOGL), which rely on passive consumption of video content. Instead, the San Francisco-based company “is a visual discovery and search tool that helps users find inspiration in their lives,” Jefferies said in its note.
Like its competitors, Pinterest (PINS) generates revenue via digital advertising, which the investment firm estimated is a $575B market, growing 8% per year.
“We are positive on PINS’ [near-term] trajectory, as we believe increases in ad load, improvements to the ad tech stack, and new advertiser partnerships (e.g. Amazon) act as positive catalysts for the stock,” the analysts added.
“Our positivity is tempered by the fact that Street [estimates] already reflect PINS gaining share of incremental industry ad revenue despite losing share over the last 2 years.”
Pinterest (PINS) also uses less video, making it harder for advertisers to scale, the analysts explained.
Separately, RBC said an analysis of Pinterest (PINS) ads showed that Amazon (NASDAQ:AMZN) is a large customer with the bulk of spending on Pinterest’s website, though the number of ads is lower than it was in the firm’s previous analysis.
Analysts are largely bullish on Pinterest (PINS). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates the stock a HOLD.
