Could Pinterest's Stock Be Running Out Of Both Buyers And Sellers After The Elliot Management Agreement? A Technical Analysis

Pinterest, Inc PINS was trading about 2% higher in the premarket on Wednesday after announcing that it had entered into a cooperation agreement with Elliott Management and appointed Marc Steinberg to Pinterest's board.

What Happened

On July 14, it was reported that Elliott had taken a 9% stake in the company, which caused Pinterest to close the following trading day 16% higher. In the formal agreement, it’s required that Elliot must maintain at least a 4.3% stake in the company.

Steinberg, a senior portfolio manager at the activist investment firm, is responsible for public and private equity investments across the technology, media, and telecommunications sector and has worked closely with Jesse Cohn, an Elliott partner, who was appointed to the Twitter board in March 2020.

Pinterest CEO Bill Ready said the agreement was “one-of-a-kind.”

“We look forward to working together as we execute on our strategy to increase engagement with users, deepen monetization per user, and build personalized experiences on Pinterest that go from inspiration and intent to action – all while creating a more positive and inspiring place online," said Ready.

An Analyst's View

Following the news, Rosenblatt Securities analyst Barton Crockett maintained a Neutral rating on Pinterest and reiterated a $23 price target.

While Elliot’s involvement could help Ready, a former Alphabet, Inc GOOG GOOGL executive, further monetize Pinterest, “there are a lot of reasons why users, in a more difficult macro, might be resistant to changing behaviors enough to drive a meaningful inflection in Pinterest's business,” Crockett said in a note.

The analyst has also seen evidence that ad revenues have continued to weaken this quarter. “That is a setup that would not be supportive of "meaningful" margin expansion in 2023,” the analyst said.

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The Pinterest Chart

Pinterest has been trading in a sideways pattern since Aug. 2, bouncing up and down between $20.68 and $26.57. As Pinterest has progressed sideways within the pattern, the volume has been trendline lower, which indicates the stock may be running out of both buyers and sellers.

• Since Sept. 9, Pinterest has been trading near the 200-day simple moving average (SMA), which suggests the stock is currently in a bull market. On Oct. 14, the 50-day SMA crossed above the 200-day SMA, causing a golden cross to form, which is a good sign for the bulls but Pinterest has so far failed to gain any momentum.
• On Wednesday, Pinterest fell to test the 200-day SMA as support and bulls will want to see the stock close above the level. If Pinterest loses support at the 200-day, bullish traders can watch for the stock to potentially form a bullish reversal candlestick, such as a doji or hammer candlestick, at the bottom trendline of the sideways pattern.
• Bearish traders may choose to wait until Pinterest spikes up and reverses course at the top trendline of the pattern in order to take a position. If Pinterest breaks down through the bottom trendline of the sideways pattern, it would suggest the bears have gained control.
• Pinterest has resistance above at $26.37 and $31 and support below at $21.24 and $19.04.

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