Wells Fargo Sees 30% Upside In Pinterest Shares, Says 'Fundamentals Remain On Solid Footing'

Shares of social media platform Pinterest Inc PINS are poised to take off given its material underperformance relative to the broader market since its April 2019 IPO, according to Wells Fargo. 

The Pinterest Analyst

Brian Fitzgerald upgraded Pinterest from Equal-weight to Overweight and hiked the price target from $28 to $30.

The Pinterest Thesis

Pinterest has delivered generally solid results, comfortably exceeding pre-IPO targets with healthy audience and engagement growth, strong revenue growth and solid progress toward profitability, Fitzgerald said in a Friday note. (See his track record here.) 

"The company's fundamentals remain on a solid footing," the analyst said. 

Wells Fargo sees the following ongoing catalysts as being intact:

• Engagement gains, platform optimization and more video on the platform
• Global monetization improvement from ongoing ad tech platform investments and the rollout of self-service
• Narrowing of the international monetization gap
• Margin expansion
• Sell-side expectations have reset to more realistic levels after Pinterest's third-quarter print, Fitzgerald said. 

Apart from its large audience of over 300 million monthly active users, Pinterest is also attracting large brand advertisers, leading to strong ad revenue growth, the analyst said. 

Wells Fargo seesa continued revenue growth runway for Pinterest thanks to audience and engagement growth, the increasing penetration of large brand advertiser budgets and increased prioritization of international monetization.

"Alongside tremendous top-line growth opportunity (29% 2019-2020 CAGR), we believe PINS will significantly expand margins, with EBITDA margin of -5% in 2018 expanding to 25%+ over the long term." 

Pinterest Price Action

The stock was trading 1.53% higher at $23.30 at the time of publication Friday. 

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