Why Pinterest Analysts Are Buying The Story: 'Better-Than-Feared' Q2, New CEO And More

Why Pinterest Analysts Are Buying The Story: 'Better-Than-Feared' Q2, New CEO And More

Pinterest reported second-quarter financial results after the close Monday and saw shares jump on the report and guidance that calls for mid-single digit year-over-year growth for the third quarter.

Here’s what analysts had to say about earnings and new CEO Bill Ready.

The Pinterest Analysts: Morgan Stanley analyst Brian Nowak has an Equal-Weight rating and $18 price target.

Wells Fargo analyst Brian Fitzgerald has an Overweight rating and lowered the price target from $37 to $34.

RBC Capital analyst Brad Erickson has a Sector Perform rating and $23 price target. 

Rosenblatt analyst Barton Crockett has a Neutral rating and $21 price target.

KeyBanc analyst Justin Patterson has an Overweight rating and raised the price target from $24 to $28.

Related Link: After Hours Alert: Why Pinterest Stock Is Soaring 

The Pinterest Takeaways: One of the themes from analysts in their earnings recaps was the fact that results from Pinterest in the second quarter and forward looking guidance were “better than feared.”

Nowak named four areas on which he said Pinterest's new management needs to focus: execution, improving engagement trends, monetizing engagement and use of capital. The analyst highlighted the new CEO, citing opportunities for the company with search, social and e-commerce.

“We agree with these opportunities … but the reality is these are the same opportunities we have detailed multiple times over the past 2+ years,” Nowak said.

Fitzgerald sees a statement from Elliott Management being aligned with Pinterest management as a positive.

“While we believe some investors remain skeptical of PINS’ Idea content strategy, we see an emerging content consumption/creation flywheel and think PINS is making the right moves to drive engagement while continuing to refine relevance and shopping tools,” Fitzgerald said.

The analyst points to Idea Pins resonating with users and creators and relevance improving.

“Management expects that Idea Pins will be accretive to both engagement and revenue over time.”

Erickson points to the stock gaining after the report as a positive reaction to new management in place at the company and improving trends.

“Pinterest’s Q2 report was better than feared, with new management’s vigor and a strong activist endorsement driving a strong after-hours response,” Erickson said.

New content initiatives show meaningful progress and monthly active users could stabilize in the second half, as highlighted by the analyst.

“While the move after-hours is well warranted, in our view, we believe the stock will quickly bake in elevated growth expectations that the shares may have to grow into.”

Crockett said guidance for next year won’t be attained and the post-earnings move for shares was “interesting.” Crockett points to hesitation in the company’s margin expansion goals.

“We see no way this can happen if the ad recession persists, unless Ready is ready to take a hatchet to his cost structure, which seems the opposite of the tenor of his comments, and probably not the right move right now,” Crockett said.

One of the few analysts to raise the price target on Pinterest after the earnings report was Patterson.

“Pinterest’s results were better than feared and new CEO Bill Ready hit the right notes, regarding a deep focus on product and shopping, commitment to margin expansion, and evaluation of capital allocation,” Patterson said.

Monthly active users came in ahead of the analyst’s estimates and average revenue per user was highlighted as a positive.

“ARPU expansion was driven by ad launches in new geos and strong demand from international advertisers. We expect international monetization will remains a focal area.”

Patterson sees Ready as the right CEO to lead the company going forward.

PINS Price Action: Pinterest shares were trading 11.56% higher at $22.30 Tuesday versus a 52-week range of $16.14 to $36.95.

Photo via Shutterstock. 

Posted In: Barton CrockettBrad EricksonBrian FitzgeraldBrian NowakJustin PattersonKeyBancMorgan StanleyRBC CapitalRosenblattWells FargoAnalyst ColorEarningsNewsSocial MediaGuidancePrice TargetReiterationTop StoriesAnalyst RatingsMoversTrading IdeasGeneral