What Happened:
Shares of social commerce platform Pinterest (NYSE: PINS) jumped 5% in the pre-market session after analyst Ken Gawrelski of Wells Fargo upgraded the stock's rating from Equal-Weight (Hold) to Overweight (Buy) and raised the price target from $23 to $34. The price target implied a potential 29% upside from where shares were traded when the report was released. The analyst highlighted "a strong catalyst path" over the next six to 12 months and noted that "improving engagement trends and higher ad load will allow PINS to deliver accelerating and above-consensus revenue growth."
What is the market telling us:
Pinterest's shares are somewhat volatile and over the last year have had 28 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 previous big move was two 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 23% since the beginning of the year, and at $28.13 per share it is trading close to its 52-week high of $29.10 from February 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 $1,150.
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