The Street Is Out With Pinterest Ratings

Pinterest Inc (NYSE: PINS) debuted on a public market in April and research firms are now free to offer their recommendations to clients. Here’s a sampling of what some sell-side firms think about Pinterest.

Bank of America’s Justin Post initiated coverage of Pinterest with a Neutral rating and $32 price target.

UBS’ Eric Sheridan initiates at Neutral, $31 price target.

‘Big’ Growth Potential

Pinterest’s user monetization levels are “relatively low” compared to rival social media platforms, Post wrote in a note. Specifically, the company’s 2019 annual average revenue per user is estimated at $3.67 versus Facebook, Inc. (NASDAQ: FB) at $29.04 and Twitter Inc (NYSE: TWTR) at $10.78.

Assuming Pinterest is able to lift its ARPU to Twitter’s levels, revenue could come in at $3.2 billion. The company has other potential revenue streams from opportunities in e-commerce.

Other potential drivers of growth include the introduction of a self-serve platform, growth in international markets and potential for new revenue streams to come at high incremental margins.

Three risks to Pinterest’s stock, according Post, include a high relative valuation, potential slowdown in U.S. user growth decelerating revenue growth after a “strong” 2018.

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Yes To ‘Pivotal Questions’

Two of the more pivotal questions Pinterest investors are asking include the sustainability of 25 percent revenue and ad monetization growth and path towards profitability, Sheridan wrote in a note.

Pinterest has a path to increase ad monetization and revenue growth at a 25 percent compounded annual growth rate through 2023. The analyst said the company’s already existing ad load offers users a high commercial intent and gives advertisers a compelling value proposition. As Pinterest’s user base continues to grow and engagement levels remain stable, the company can improve the monetization gap versus its peers.

Pinterest should become free cash flow and Adjusted EBITDA positive by fiscal 2020, the analyst wrote. Management can improve its cost structure through optimizing cloud-related expenses, which account for around 90 percent of cost of goods sold. The company can see operating leverage from research & development, sales and marketing.

Elsewhere On The Street

• Barclays initiates coverage on Pinterest with an Equal-Weight rating, $28 price target
• Citigroup initiates with a Buy Rating, $34 price target
• Goldman Sachs initiates with a Neutral Rating, $25 price target
• JPMorgan initiates with a Neutral Rating, $32 price target
• Credit Suisse initiates with a Neutral Rating, $28 price target
• RBC Capital initiates with a Sector Perform Rating, $28 price target

Pinterest’s stock traded lower by 5.3 percent at $27.50 per share Monday afternoon.

Related Links:

5 Reasons Nomura Likes Pinterest

Rosenblatt Ambivalent On Pinterest, Waits To Compare To Leading Ad Platforms