Why This Pinterest Analyst Sees Accelerated User Growth, Engagement Ahead With Focus On Shopping Opportunity

Pinterest Inc PINS shares are getting a boost from Goldman Sachs Thursday after the analyst firm upgraded the online product and idea discovery company.

What Happened: Goldman Sachs upgraded Pinterest from Neutral to Buy and raised the price target from $24 to $31, citing improved user growth and engagement trends.

Conference Highlights: Senior management from Pinterest recently spoke at the 2022 Goldman Sachs Communacopia + Technology Conference. Goldman Sachs analysts highlighted some of the key takeaways Thursday in a new note to clients. 

• Management remains focused on the long-term vision to enable full-funnel commerce on its platform.
• Management aims to improve the shopping experience on the platform and ramp up shoppable inventory via direct merchant integrations and partnerships.
• Given the pressure on margins in 2022, the company remains focused on investment opportunities in the short term.

"While other social/digital media platforms have adopted shopping & social commerce capabilities with varying degrees of success over the past several years, we view Pinterest as a more unique/holistic offering for advertisers with its high shopping-intent user base and full-funnel utilities across both discovery & conversion," Goldman Sachs analysts said.

The analysts viewed management's new focus about the shopping opportunity as a positive for improved execution and cost efficiencies. 

See Also: Pinterest To Rally Over 25%? Here Are 5 Other Price Target Changes For Thursday

Channel Checks: Following a series of channel checks, Goldman Sachs increased its confidence in the company's ability to grow its monetization and capture a greater share of advertising budgets. 

"Recent data shows some stabilization of user growth and re-acceleration of engagement growth in Q3, which we view as a positive indication that post-COVID headwinds are starting to normalize," Goldman Sachs said.

Monthly active users were starting to trend in the right direction, the analyst firm said, citing data from SensorTower. Total app download volume was also starting to rebound off depressed levels at the beginning of the year. 

Download volume accelerated month-over-month in the third quarter, but it's still down about 4% year-over-year in the U.S., while International app download volumes jumped 7%, Goldman Sachs said. 

The analyst firm noted that the current advertising landscape remained a risk factor to the firm's outlook, but the company remains well positioned for the long term. 

"Despite some uncertainty around the near-term operating environment (MAU growth, macroeconomic impact on industry spend, competition, etc.), we see Pinterest as positively levered to a number of long-term secular growth themes (engagement & ad spend shifting online, social commerce, creator economy, etc.) and see a more positive risk/reward skew at current levels," Goldman Sachs said.

PINS Price Action: Pinterest has a 52-week high of $66 and a 52-week low of $16.14.

The stock was up 4.10% at $25.64 at time of publication Thursday, according to Benzinga Pro.

Photo: Souvik Banerjee from Pixabay.