Shares of social commerce platform Pinterest (NYSE: PINS) jumped 5.53% in the morning session after Wall Street analysts expressed renewed optimism regarding the company's prospects following the Investor Day event on September 19, 2023. DA Davidson analyst Tom Forte upgraded the stock's rating from Neutral to Buy and lifted the price target from $25 to $35. Similarly, Citigroup analyst Ronald Josey lifted the stock's rating from Neutral to Buy and raised the price target from $31 to $36, citing the potential for improved platform engagement and a better monetization approach.
During the session, Pinterest raised its outlook for Q3'2023. While the company had previously guided for revenue growth to come in at the midpoint of its forecast range (high single-digits year-over-year), it now expects revenue growth to fall at the high end of that range. Pinterest also remains confident in delivering 4 percentage points of adjusted EBITDA margin expansion for the full year 2023. Over the next 3 to 5 years, Pinterest expects revenue growth in the mid-to-high teens and adjusted EBITDA margin to exceed 30%.
To achieve some of these goals, management announced plans to continue improving platform engagement, monetization, and also scale internationally. Lastly, the company demonstrated its focus on returning value to shareholders by announcing a $1 billion share buyback authorization. After the initial pop the shares cooled down to $27.30, up 4.14% from previous close.
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What is the market telling us:
Pinterest's shares are somewhat volatile and over the last year have had 21 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock dropped 12.8% on the news that the company reported first-quarter revenue that narrowly beat analysts' forecasts, and earnings per share (EPS) also exceeded expectations. However, Domestic MAUs slightly missed expectations and growth was tepid. Pinterest expects that Q2 revenue will grow roughly in-line with what they saw in Q4 2022 and Q1 2023, which translates to 4-5% y/y growth. This missed expectations of roughly 6% y/y growth in Q2 2023 revenue. In addition, Pinterest expects Q2 non-GAAP operating expenses to grow low teens on a percentage basis quarter-over-quarter. This implies an operating profit guidance miss vs. expectations, which is another major negative. Lastly, Todd Morgenfeld, its finance chief and business operations leader, will depart the company on July 1, 2023.
Pinterest is up 19.4% since the beginning of the year, but at $27.30 per share it is still trading 9.95% below its 52-week high of $30.31 from July 2023. Investors who bought $1,000 worth of Pinterest's shares at the IPO in April 2019 would now be looking at an investment worth $1,120.
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