Pinterest gets Overweight rating, $23 Price Target before its IPO

281
SHARE

Pinterest filed for initial public offering (IPO) with the Securities and Exchange Commission (SEC) on Tuesday. The social media company disclosed that it will be trading its shares on the New York Stock Exchange (NYSE) under the ticker “PINS.”

Additionally, Pinterest stated in its form S-1 filing that it is planning to sell 75 million shares of Class A common stock at a price between $15 and $17 each. The social media company’s valuation could reach around $11.3 billion based on the upper-end of its expected IPO price.

Analyst believes Pinterest is capable of generating superior ad revenue

On Tuesday, Pinterest received a bullish recommendation from a Wall Street analyst before its public offering.

James Cordwell, an analyst at Atlantic Equities, issued an “Overweight” rating and a 12-month price target of $23 on PINS shares.

In a note to investors, Caldwell predicted that Pinterest will return to achieving a double-digit growth in the second quarter. He also expected the social media company to replicate its U.S. success abroad.

According to him, “We believe the company’s unique and broadly appealing proposition, offering consumers the ability to view and collate visual recommendations will enable ongoing robust user growth… We expect significant monetization upside given the higher purchasing intent of the user base, yet lower current [average revenue per user] than other ad-supported platforms.”

Cordwell estimated that Pinterest’s sales will increase from $765 million in 2018 to $1.1 billion this year. He also expected the social media company to post profits on an adjusted, non-GAAP basis this year and on generally accepted accounting principles by 2021.

Pinterest’s engagement is weaker than other social networks

Although Cordwell is very optimistic about the future of Pinterest, he is concerned about its weaker engagement than its peers such as Facebook (NASDAQ: FB) and Twitter (NYSE: TWTR).

He noted, “While Pinterest has a compelling use case, its lack of a material social element means engagement is less strong than at peers … We believe its engagement metrics are materially below those of the social networks (Facebook, Twitter, Snap) due to it not having the same ‘call to action’ that comes from updates by friends, family and other accounts.”