Pinterest Inc (NYSE: PINS) rallied this morning after a Piper Sandler analyst turned bullish on the image sharing platform citing “multiple tailwinds” for 2023.
Pinterest stock should be worth $30
Thomas Champion now sees upside in this social media stock to $30 that translates to about a 25% premium on its previous close.
He’s convinced that Pinterest will expand its footprint in ads next year, thanks to an improved product and the fallout at Twitter Inc. Champion sees its recent agreement with activist Elliott Management as a positive catalyst as well.
We like the new leadership and investor activism. The lows are likely already in.
Last week, Pinterest announced a layoff, which, the analyst expects, will also help with margins. Versus the start of 2022, Pinterest stock is down nearly 30% at writing.
Pinterest Inc will continue to add users
In its latest reported quarter, Pinterest added 3.0 million monthly active users (MAUs) in the United States and Canada combined – a promising trend that Champion expects will continue moving forward.
Lastly, the analyst upgraded Pinterest stock to “overweight” because he sees a buyback coming.
Pinterest ended Q3 with $2.7 billion in cash. With ~$500 million in FY23E free cash flow by our model, it’s sufficiently profitable and over-capitalised. At 3Q, PINS said they continue to evaluate the broader capital allocation strategy.
Street is estimating about a 15% growth in revenue for 2023, which is quite conservative compared to the kind of growth we’ve seen at Pinterest in the past, Champion concluded.
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