Why Pinterest Is Different Than Traditional Social Media Platforms

Pinterest Inc PINS stands out against its social media peers, which makes it well positioned to win ad market share.

The Analyst

Wedbush's Ygal Arounian initiated coverage of Pinterest with an Outperform rating and $33 12-month price target.

The Thesis

Pinterest stands out against its text and video focused social media peers as it offers a "visual experience at heart" with the purposes of finding products that aren't possible through text, Arounian wrote in the note. This positions Pinterest well for the future of how consumers search for products online and represent a long-term differentiator.

Despite the fact that Pinterest is a different breed of social media, the company still competes for the same digital ad dollars. The analyst said Pinterest is far behind its peers as it will take in an estimated $1.9 billion of ad revenue in 2019, which is less than 1% of the total global digital ad spend.

The company has plenty of space to grow ad revenue, especially as advertisers appreciate its image-based platform. Pinterest can evolve to enable e-commerce transactions over the longer term but also stands to benefit in the near term through ad products as the global digital advertising market is expected to grow at a 13% CAGR through 2023.

The company could see additional upside through a consistent and successful expansion of monetization efforts across the world.

Price Action

Shares of Pinterest traded higher by 1.7% to $28.31 at time of publication.

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