Google Is Logical Media Network Partner For Pinterest, Analyst Says While Boosting Price Target By 15%

RBC Capital analyst Brad Erickson maintains Pinterest Inc PINS with a Sector Perform and raises the price target from $26 to $30.
PINS could plug in several media network partners, the largest and most logical one, which investors expect to be Alphabet Inc GOOG GOOGL Google.
The analyst believes such a partnership could be a significant catalyst for the stock, boosting the price target.
However, his ad load analysis suggests PINS is potentially more well-backed than investors may appreciate. The analyst had reservations about user experience degradation and engagement necessary to fill incremental category supply.
Ultimately, evidence of broad-based, organic ROAS improvement signaling accelerating CPMs is likely for a more sustainable re-rate
With category expansion (i.e., supply growth), the company would create new real estate to monetize. A 3P partnership could fill that incremental supply with demand vs. slower-ramping 1P relationships.
Raising auction density could drive incremental CPM inflation.
It would give access to a broader advertiser base, particularly Small and Medium Businesses.
In the event of broadly improving conversion, the company would have access to meaningful new scale within existing advertiser demand.
However, a 3P partnership could more fully bake Pinterest's ad load and deteriorate the user experience driving incremental engagement headwinds.
Given the limited scope of PINS' user habits, the category expansion could prove slow.
While providing an initial bump to revenue, bringing in a 3P partner could fail to drive the appeal to the broader advertiser customer base.
Bringing on a partner like this is a quick fix and, given a likely dilutive revenue share arrangement, reduces the odds of maximizing revenue over the long term.
Price Action: PINS shares traded higher by 1.01% at $27.55 on the last check Monday.