On Tuesday, Piper Sandler adjusted its stance on Pinterest Inc (NYSE:NYSE:PINS) stock, moving its rating from Overweight to Neutral and reducing the price target to $36 from $41. The firm cited a series of mixed financial results and cautious growth projections as the reasons for the downgrade.
According to InvestingPro data, Pinterest maintains a "GREAT" overall financial health score, with 16 analysts recently revising their earnings expectations upward for the upcoming period.
For deeper insights into Pinterest's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
The decision comes after Pinterest delivered two quarters of inconsistent financial performance. While Piper Sandler expressed skepticism about future growth, current data from InvestingPro shows Pinterest achieved 17.7% revenue growth in the last twelve months, with a robust gross profit margin of 78.9%.
The company's revenue CAGR over the past five years stands at 32%, though analysts at Piper Sandler are cautious about maintaining such momentum, particularly given the fourth quarter guidance suggesting only a 15-17% increase. The first quarter of 2025 is expected to see growth in the low double-digit range, adding to the concerns.
Piper Sandler's assessment of Pinterest's new advertising feature, Performance +, revealed mixed initial responses. An Ad Buyer Survey indicated that Pinterest is facing a highly competitive advertising field, particularly among Small and Medium-sized businesses (SMID). These factors have led to lowered revenue estimates for the social media company.
The firm's analysts emphasized the need for more confidence in Pinterest's business model before considering a more favorable rating. They noted unresolved questions following the third quarter financial results, which have prompted the current wait-and-see approach.
The revised price target of $36, down from $41, is based on a Discounted Cash Flow (DCF) analysis. This new target reflects the firm's updated expectations for Pinterest's financial performance and growth trajectory in the near term.
Based on InvestingPro's Fair Value analysis, Pinterest currently appears to be trading near its Fair Value, with analyst targets ranging from $28 to $51. The stock trades at a P/E ratio of 103.7x, though its PEG ratio of 0.53 suggests potential value relative to its growth rate.
In other recent news, Pinterest Inc. has made significant strides in its financial performance and corporate structure. The company recently reported an 18% increase in revenue for Q3 2024, reaching $898 million, and an 11% rise in global monthly active users. Despite these gains, Q4 revenue guidance fell short of expectations, triggering KeyBanc to reduce Pinterest's price target from $45 to $39, while maintaining an Overweight rating.
BMO (TSX:BMO) Capital Markets also adjusted its outlook on Pinterest, lowering the price target from $46 to $40 due to anticipated increases in research and development costs. These strategic investments are expected to enhance Pinterest's content ranking and recommendation systems over the long term.
Meanwhile, Wedbush upgraded Pinterest's stock rating from Neutral to Outperform, setting a new price target of $38. The firm expressed confidence in Pinterest's growth trajectory, predicting a compound annual growth rate of about 27% over the next three years for Pinterest's adjusted EBITDA.
On the corporate front, Pinterest has amended its registered agent and office in Delaware, with the Corporation Trust Company now serving as the new registered agent. This change comes as part of the company's ongoing corporate governance and compliance efforts. These are recent developments that investors should be aware of as they reflect the company's financial performance and strategic decisions.
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