Pinterest (NYSE:PINS) is trading up 3.6% in pre-open trading Tuesday after Evercore ISI analysts upgraded the stock to Outperform from In Line while raising its price target to a ‘Street High’ $41 (from $30).
The analysts cited four reasons for the upgrade:
- Clear evidence of Digital Ad spend stabilizing, moving away from trough levels of late ’22, and showing tentative evidence of an H2 recovery.
- Operational improvements implemented by new CEO Bill Ready, leading to positive outcomes for both users and advertisers.
- Combination of the first two reasons creating a fundamental inflection point, with the expectation of significant revenue growth acceleration, substantial margin expansion, and high double-digit EBITDA growth (e.g., 50%+ Y/Y in Q4) over the next 2-4 quarters. This growth potential is likely to result in a re-rating of PINS shares.
- Current valuation (27X ’24 EV/EBITDA & 21X ’25 EV/EBITDA) considered reasonable for a company with the potential to sustain 30%+ EBITDA growth and a track record of consistent free cash flow (FCF) generation. The company is also expected to deliver 20%+ FCF margins by 2025.
The firm’s new $41 price target is based on 30X the firm’s ’25 EBITDA of $833M, adjusting for an estimated $3.7 billion in year-end 2024 net cash. The firm’s new price target represents the highest on Wall Street.
Shares of PINS are up 20% year-to-date.
