Microsoft (MSFT) - Get Report has enough capital to purchase Pinterest (PINS) - Get Report, analysts said Thursday following reports that the software giant had approached the image-sharing social media platform about a possible acquisition.
Shares of the San Francisco-based Pinterest were climbing 3.5% to $83.94 on Thursday, while Microsoft was up slightly to $243.25.
Microsoft had approached Pinterest about a potential acquisition, according to a story in the Financial Times, which said the talks currently weren't active.
Pinterest has seen its market value increase 600% during the coronavirus pandemic. The company has indicated in the past that it wanted to remain independent.
Microsoft has made several acquisitions and analysts at Bloomberg Intelligence believe the company successfully bring Pinterest into the fold.
"With Microsoft's attempt to grow its social media presence recently thwarted by TikTok's rejection, we believe the company has ample financial firepower to afford large-scale M&A, including its reported interest in Pinterest," the research group said.
With $132 billion of cash and over $50 billion of free cash flow, Bloomberg Intelligence said "size shouldn't be a deterrent to Microsoft as significant acquisition is unlikely to move spreads wider for the tech sector's highest rated (Aaa/AAA) credit."
"There are few Microsoft credit or equity concerns, with a massive cash hoard and market capitalization of $1.8 trillion," the group added.
Buying Pinterest “could expand Microsoft’s addressable market in advertising and e-commerce,” said Bloomberg Intelligence's Mandeep Singh.
Last week, Pinterest beat analysts’ expectations for its fourth-quarter earnings on a surge in revenue during the period. The company has benefited from the coronavirus pandemic shutdown, which has kept people at home during lockdowns.