Pinterest Drops as User Growth Lags; Analysts Stand Pat

Pinterest shares dropped after the social-media pinboard for photos reported slowing user growth, and analysts largely stood by their current opinions.
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Pinterest  (PINS) - Get Report shares dropped on Wednesday after the social-media pinboard for photos reported slowing user growth, and analysts largely stood by their current opinions.

Analysts at JPMorgan reiterated an overweight rating and $95 price target on the San Francisco company, though the investment firm said that post-COVID-19 reopening will hurt engagement going forward. 

"We remain overweight on PINS as it continues to optimize its ad supply, drive higher conversions, and expand its ad offerings," analyst Doug Anmuth said. 

"However, slowing user growth is likely to make the shares more controversial at current multiples, and PINS will need to show continued strong monetization to offset the effects of slower engagement." 

Morgan Stanley also remained overweight, but the firm lowered its price target on Pinterest to $83 a share from $89. 

"Pinterest's social shopping/improving monetization tools continue to deliver for advertisers ([revenue per thousand ad impressions up 46% year over year] from better performance)," analyst Brian Nowak wrote.

"Given how undermonetized PINS is, these trends are key to long-term free cash flow. Near-term reopening user uncertainty may pressure [the] shares tactically, but we remain bullish." 

Meanwhile, analysts at Credit Suisse left their $97 price target unchanged with a neutral rating. 

"We expect investor attention to be on the decelerating monthly active user growth, but the engagement benefits from the pandemic due to the various levels of shelter-in-place were always going to be unsustainable," analyst Stephen Ju said.

Analysts at Piper Sandler also reiterated a neutral rating while lowering their price target to $76 a share from $85. 

"Among the positives, revenue was 4% above PSC forecasts and [earnings before interest, taxes, depreciation and amortization] was 8% better," analyst Thomas Champion said.

"But management guided to a quarter-over-quarter decrease in monthly average users for the U.S., and commentary suggested PINS may be facing engagement headwinds with reopening." 

Pinterest shares at last check were falling 11% to $68.78.