Tuesday, Wolfe Research initiated coverage on shares of Pinterest Inc (NYSE:PINS) with a Peerperform rating, citing a balanced risk/reward profile. The firm set a fair value (FV) range for Pinterest at $33-$57, based on 20x-30x fiscal year 2025 estimated EV/EBITDA (enterprise value/earnings before interest, taxes, depreciation, and amortization).
The research firm's outlook is grounded on Pinterest's high-teen percentage growth rate, which includes contributions from third-party partnerships, and the expected trajectory of margin expansion. Wolfe Research mentioned that they would look for a more attractive entry point or signs of sustainably robust growth rates before altering their stance on the stock.
Pinterest's current trading valuation is at approximately 22.7 times its estimated 2025 EV/EBITDA, which is a 14.5 times discount compared to Snap Inc (NYSE:SNAP)., as opposed to Pinterest's two-year median EV/EBITDA of 23.4 times and a median discount of 11.9 times to Snap.
This valuation is slightly above the median multiples for the digital ads comparison group but is considered reasonable by Wolfe Research, given the anticipated mid to high teens top-line growth and margin expansion in the near to mid-term.
The analyst's comments reinforce the firm's neutral position, emphasizing the need for clear indicators of sustainable growth before recommending Pinterest as a more compelling investment. They believe the current valuation reflects a fair assessment of Pinterest's growth potential balanced against the risks involved.
This initiation of coverage and the set fair value range will likely be of interest to investors looking to gauge Pinterest's market position and future prospects in relation to its peers in the digital advertising space.
In other recent news, Snap Inc's stock valuation was initiated with a Peer Perform rating by Wolfe Research, based on projected financials for the fiscal year 2025. The firm set a fair value range for Snap shares between $13 and $24, reflecting an even risk/reward balance despite concerns about slowing revenue growth and subdued user engagement.
Meanwhile, Pinterest Inc has been the subject of several significant developments. Piper Sandler reaffirmed its Overweight rating on Pinterest, with a price target of $52.00, despite mixed observations regarding advertising load and engagement trends on Amazon (NASDAQ:AMZN).
The firm also maintained its Overweight rating in a later report, highlighting Pinterest's continued product development despite a downtrend in certain performance metrics.
Furthermore, Pinterest saw its price target increased to $52.00 from $50.00 by Piper Sandler, which kept an Overweight rating on the stock. This adjustment was based on a new analytical model evaluating the company's SG&A spending across its core business verticals.
Lastly, Pinterest announced the appointment of retail veteran Charles "Chip" Bergh to its Board of Directors. Bergh's extensive experience in the retail sector is expected to significantly contribute to Pinterest's growth phase.
InvestingPro Insights
As we consider the recent analysis by Wolfe Research on Pinterest Inc (NYSE:PINS), it's worth noting some key metrics and insights from InvestingPro that could provide additional context for investors. Pinterest's market capitalization stands robust at $28.26 billion, reflecting the company's significant presence in the digital space. Despite a high P/E ratio of 187.45, which indicates a premium valuation, the company's strong revenue growth of 22.8% in Q1 2024 suggests that investors are optimistic about its future prospects. Additionally, Pinterest's gross profit margin remains impressive at 78.11%, underscoring the efficiency of its business model.
InvestingPro Tips highlight that Pinterest holds more cash than debt, which is a sign of financial stability, and that net income is expected to grow this year, potentially reassuring investors looking for profitability. Moreover, with analysts predicting the company to be profitable over the last twelve months and a strong return over the last three months of 26.48%, Pinterest's performance trajectory appears to be on an upward trend. For those interested in a deeper dive into the company's financials and future outlook, InvestingPro offers several additional tips. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription for access to these valuable insights.
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