On Friday, Piper Sandler maintained its Overweight rating on Pinterest Inc (NYSE:NYSE:PINS) with a price target of $52.00. The firm's stance remains positive on the social media company, emphasizing Pinterest's continued product development despite a downtrend in certain performance metrics.
The May Cost Per Thousand Impressions (CPMs) decreased by 15% year-over-year, following a 12% year-over-year decline in April. Additionally, the Cost Per Click (CPC) fell by 73% compared to the same period last year, which marked a steeper decline than the 65% drop observed in April.
The firm views the lower pricing as a positive sign for Pinterest as it introduces new products. Traffic from Pinterest to Amazon (NASDAQ:AMZN) showed an 83% year-over-year increase in May, which, despite being robust, indicated a slowdown from approximately 147% in April and a consistent 100% or more growth in the prior seven months. Analysis of advertisements also revealed a reduced mix of Amazon content.
Piper Sandler acknowledged the potential for weaker traffic from Amazon but pointed out several factors to mitigate concerns. The firm expects fluctuations in testing and ramping activities, believes the auction dynamics naturally offset weaker traffic, and notes that the majority of Pinterest's strength in the first quarter of 2024 was driven by first-party improvements. Recent discussions with Pinterest's management have left the analysts with a constructive outlook.
In the previous month, Piper Sandler had reported on the encouraging signs of Pinterest's usage alongside Google (NASDAQ:GOOGL) Search, suggesting a positive trend for the platform's engagement and reach. The firm reiterated its top pick status for Pinterest in the small to mid-cap (SMID) space, signaling confidence in the company's trajectory despite the observed deceleration in traffic growth from a key partner.
In other recent news, Pinterest Inc has seen a series of positive developments. Piper Sandler increased Pinterest's price target to $52.00, maintaining an Overweight rating, based on a model that evaluates the company's SG&A spending across its core business verticals. The firm noted Pinterest's revenue growth as an indicator of increasing market share capture. Loop Capital also raised its price target for Pinterest to $49, citing advancements across the company's main growth areas.
In addition, BMO (TSX:BMO) Capital Markets increased Pinterest's price target to $46, attributing the rise to Pinterest's successful integration of Amazon ads in the U.S. and Canada, which resulted in a significant revenue increase. Citi also raised its stock price target for Pinterest to $51.00, highlighting the successful introduction of new products that have enhanced user engagement and usage.
Furthermore, Pinterest announced the appointment of retail veteran Charles "Chip" Bergh to its Board of Directors. Bergh, with his extensive experience in the retail sector, is expected to contribute significantly to Pinterest's growth phase.
InvestingPro Insights
Piper Sandler's optimistic view on Pinterest Inc (NYSE:PINS) is further supported by key financial metrics and analyst sentiments. InvestingPro data highlights that Pinterest is trading close to its 52-week high, with a robust one-year price total return of 77.03%. This performance underscores the company's strong market position, aligning with Piper Sandler's positive outlook.
InvestingPro Tips reveal that Pinterest holds more cash than debt on its balance sheet and is expected to see net income growth this year. These factors suggest a healthy financial state and potential for continued profitability, which may reassure investors looking for stability and growth.
Additionally, the fact that 15 analysts have revised their earnings upwards for the upcoming period points to a consensus that Pinterest's prospects are improving. This aligns with Piper Sandler's emphasis on the company's product development and potential for increased engagement and reach.
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