Wedbush lifts Pinterest to Buy, shares climb

Investing.com -- Wedbush analysts upped their price target on Pinterest (NYSE:PINS) shares to Outperform from Neutral, citing the effective execution of its user engagement and monetization strategies.

Pinterest stock rose around 1.5% in premarket trading Monday (NASDAQ:MNDY).

Analysts at Wedbush believe that the company is on track to achieve growth and profits consistent with its multi-year guidance framework.

Their confidence in Pinterest is further bolstered by the company's potential to grow adjusted EBITDA at an approximate 27% compound annual growth rate (CAGR) over the next three years. This growth projection aligns with the company's own guidance.

The stock is currently trading at roughly 11.6 times Wedbush's 2026 adjusted EBITDA estimate, which the firm considers an overreaction to the third-quarter results.

The firm sees several drivers that could enhance Pinterest's monetization efforts in the intermediate term.

These include the expansion of third-party demand partnerships with major players such as Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL), the introduction of new advertising surfaces and formats, the continued adoption of lower-funnel advertising tools which could lead to better conversion rates and visibility for advertisers, and ongoing collaborations with resellers in markets where monetization is still developing.

Wedbush also points to potential factors that could lead to performance exceeding the company's guidance trajectory, such as “the compounding effect of newer monetization strategies, and the lapping of multiple headwinds to advertiser spend, including sustained declines in ad pricing and weakness in consumer packaged goods (CPG).”

Further, the investment bank suggests that the lowered expectations following Pinterest's third-quarter results present a limited downside risk.

“We think investors should take advantage of this period of relative weakness, given a more attractive risk/reward in our view for a platform with considerable monetization potential ahead,” analysts led by Scott Devitt concluded.