The investment firm cited "stalled user growth" for internet stocks in the U.S. and added that the graphics-focused company needs a better content and monetization strategy for a more bullish outlook.
Shares of the San Francisco company at last check traded 4.4% higher at $53.15.
"Pinterest is running a prudent play of steadily ramping monetization through an improving ad platform and eventually, commerce," RBC Capital Markets analysts Brad Erickson and Daniel Parr said.
It has developed "a small but stable foothold" in the growing $483 billion global advertising market.
"While the company rolled out critical self-serve/auto-bid features last year, based on our checks, measurability and performance have a long runway for improvement in the eyes of advertisers which could drive average revenue per user," they wrote.
"Our checks indicate that Pinterest's perceived conversion has generally been low relative to competitors, meaning it will likely be an uphill battle to drive organic gross merchandise value even as native checkout likely arrives soon," RBC Capital Markets noted.
The investment firm added that "while clearly there is a long runway for growth overseas, the monetization gap remains wide enough," which does not bode well for the stock price.
"We believe user growth is likely closer to plateauing than not and our channel feedback indicated that outside of targeted categories, conversion needs improvement, particularly vs. FB where we think user crossover is virtually 100%," said Erickson.
The investment firm has a price target of $58 a share for Pinterest.
RBC Capital Markets expects single-digit user growth and double-digit average revenue per user growth from Pinterest over the next three to five years.