Shares of social media platform Pinterest (PINS) - Get Report were little changed Wednesday after Loop Capital Markets analyst Rob Sanderson initiated coverage of the stock with a buy rating and a $29 price target.
The analyst said he was impressed with user growth at Pinterest, the online bulletin board.
“We think PINS is among the most interesting of the small- and mid-cap stocks in the U.S. Internet sector,” Sanderson wrote in a report. Pinterest has “great potential as an advertising and e-commerce platform.”
While Pinterest users don’t engage as much with the site as users of some other top social media sites, “the network is showing healthy user growth, with monthly average users up 28% in the third quarter,” Sanderson said.
“We think the nature of engagement on Pinterest is highly aligned with commerce, offering very strong monetization potential, and we think that making Pinterest shoppable is a major opportunity,” the analyst said.
Pinterest’s advertising business is just getting going, and average revenue per user is up 23% year to date, Loop Capital's Sanderson said.
There are “many growth drivers ahead,” he wrote. “If the monetization curve continues to mirror early Facebook, this would imply a ramp to $8.5 billion in revenue by 2025, about double the Street expectation.”
The company could ultimately achieve EBITDA profit margins of 45% to 50%, Sanderson said. Pinterest reports earnings Thursday after the stock market closes.
At last check, Pinterest shares traded at $22.43, down 0.13%. The company’s stock has slumped 26% since going public last April.