5 Reasons Nomura Likes Pinterest

Pinterest Inc PINS is trading up 18 percent from its IPO price, but it may have more room to run, according to Nomura Instinet. 

The Analyst 

Analyst Mark Kelley initiated coverage of Pinterest with a Buy rating and $34 price target.

The Thesis

Kelley is inspired by five factors in the Pinterest story. (See the analyst's track record here.) 

First is the firm’s growth trajectory, which Kelley said is the fastest in Nomura’s coverage. The analyst expects continued growth in domestic and international monthly average users, or MAUs. The U.S. rate already exceeds that of Twitter Inc TWTR, and Pinterest’s per-visit engagement compares favorably with Instagram’s.

The second factor is pricing prospects. “Immediate valuations appear rich, but PINS will likely be a much larger business,” Kelley said. Nomura projects $3.5 billion to $4 billion revenue in the long term even without MAU growth.

The firm’s large addressable market and path to profitability justify further optimism.

Kelley anticipates a fast monetization ramp and a $310-billion advertising opportunity by next year, which together warrant forecasts for GAAP profitability in 2020.

Finally, Pinterest has generated positive feedback on advertising, and while its tools are already comparable to those of major peers, it has space to improve, the analyst said. 

Price Action

Pinterest shares were down 0.52 percent at $28.60 at the time of publication Friday. 

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Photo courtesy of Pinterest.