Guggenheim analyst Michael Morris initiated coverage of Pinterest (PINS) with a Buy rating and $48 price target. Morris is optimistic about the unique content that Pinterest has and commented, “We believe the platform’s differentiated use case, unique advertiser position, and ability to attract a growing, engaged community are under appreciated by investors. The company is refining its recommendations and expanding content verticals, which we believe will increase the service’s utility and drive higher frequency”.
While many have concerns with Pinterest, the analysts at Guggenheim believe that investors are greatly under appreciating the myriad upsides with the online company. Pinterest has high “platform usage and user growth,” while engagement is still consistent. In fact, not only does user interaction remain strong, but “significant additional advertising market penetration is still available,” according to the equity research team at Guggenheim. The macro market is an area of interest that the California-based company hasn’t realized yet, as “global monetization remains relatively low,” however, the current status quo could very well have implications that “provide an opportunity for sustained long term growth” - always good news for investors.
While Pinterest, at the moment, may have a high ceiling for growth, there are caveats that come with being a prominent, well-established internet company. The company sits in high regard with the likes of Amazon, Facebook, Google, Snap, and Twitter, but having that title means they’re also competing with these powerhouses for “broad-based user engagement and retention, advertising dollars,” and especially employees. The outflow of talent is a severe long-term concern, and heavy poaching of workers could cause massive headwinds. Additionally, the analysts at Guggenheim “expect that in the near-term, marketers will allocate meaningfully higher portions of budgets to more established, direct-response channels,” which encompass the larger-cap companies mentioned earlier. This hunch shouldn’t be expected to cause problems, however, it could “pose a significant risk to PINS given its earlier-stage performance and eCommerce advertising platforms.”
The company's long-term growth will also depend on the efficiency of its marketing spend, and how well they transition to foreign markets, and of course, management’s ability to address growing competition.
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