This Pinterest Analyst Sees Several Catalysts Ahead For 'Uniquely Attractive' Stock — Including Potential Acquisition

Wolfe Research sees a significant runway to long-term growth for Pinterest Inc PINS under new management.

What To Know: Wolfe Research analyst Deepak Mathivanan upgraded Pinterest from Peer Perform to Outperform on Tuesday and announced a $28 price target, citing long-term user growth and monetization potential under new CEO Bill Ready.

Wolfe Research highlighted the long-term potential of Pinterest in previous notes, but the analyst firm stayed on the sidelines until now due to macro headwinds facing the digital media space. 

"Plenty of uncertainties still exist, however, we see several company specific catalysts for shares over the next 12-18 months," Mathivanan wrote in a note to clients.

Wolfe Research sees positive monthly active user growth ahead for Pinterest following several quarters of declines. The analyst firm also expects to see margin expansion and revenue acceleration driven by new product and monetization initiatives, as well as some stability in the macro environment.

The improving fundamentals are the primary thesis for the Wolfe Research upgrade, but the firm also noted that it views the company as a "uniquely attractive asset in the digital media space," which makes it a potential acquisition target.

"A potential acquisition by a strategic is not off the table, should execution lag over time, and is likely to fetch a nice premium to current levels," the analyst said.

The analyst firm sees the downside risk in Pinterest at $18 per share.

If the company is able to execute more quickly on its long-term initiatives, Wolfe Research believes the stock could trade as high as $35 per share, representing about 55% upside from current levels. With the stock trading around $22 per share, the risk-reward opportunity is skewed to the upside, Mathivanan said. 

PINS Price Action: Pinterest has a 52-week high of $36.95 and a 52-week low of $16.14.

The stock was up 4.62% at $23.12 Wednesday afternoon, according to Benzinga Pro.Photo: Hassas Arts from Pixabay.