PreMarket Prep Stock Of The Day: Pinterest

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Chasing stocks that are takeover targets can be a very dangerous game to play.  In the event that a deal does come to fruition, it can be very rewarding.  If the deal does not materialize, it can have a devastating impact on the share price of the rumored target.

The above scenario certainly applies to Pinterest Inc PINS, which is the PreMarket Prep Stock of the Day.

The Company: Pinterest is an image sharing and social media service designed to enable the saving and discovery of information on the internet using images, and on a smaller scale, animated GIFs and videos, in the form of pinboards.

Pinterest's IPO Price Action: Pinterest made its debut on Wall Street in April 2019 at $23.75 and ended its inaugural session at $30.08.  It continued to rally and finally peaked in April at $36.83 and reversed course.  

It eventually breached its initial IPO low, falling to $17.39 and ending 2019 not far from that level at $18.63.

Post-Pandemic Price Action: The issue started 2020 off on a good note, rebounding to $27.25 in February before being crushed with the broad market in March.  Its ultimate low was made a few days ahead of the S&P 500 on March 18 at $10.10.

Coming off that low, it was higher in nine of the next 10 months, finally peaking in February of this year at $89.60 and reversing course.  It retreated quickly off that high but was able to rebound back over $80 in July.

Pinterest then fell out of favor, along with other higher P/E growth stocks, over the last few months.

Until Monday's price action, it had been on the rebound from its recent 11-month low, when it bottomed Oct. 6 at $49.01.  

Pinterest Rumor Mill: Around 11:30 a.m. on Oct. 20, it was reported that PayPal Holdings Inc. PYPL had approached Pinterest about a potential deal, and it was reported the deal was still in the “private” talk stage. Supposedly, the companies were discussing a potential price of around $70 a share, which would value Pinterest at roughly $39 billion.

As expected, the issue traded sharply higher, although potential doubters of the deal denied the issue from coming close to the rumored takeout price.  In fact, after peaking at $66, the issue backed off to end that session at $62.68.  The issue has not traded at or above that level since the rumor first started circulating on Wall Street late last week.

The day following, the issue peaked at $62.37 and backed off to end last week at $58.06.

No Deal — The Premarket Reaction: On Sunday, Paypal announced that in response to market rumors regarding the potential purchase of Pinterest that it is not pursuing an acquisition of Pinterest at this time.

Investors were able to react to the news at the commencement of premarket trading at 4 a.m. Monday. In fact, the opening print of that session ($55.20) is nearly $4 higher than the high in Monday’s session of $51.39 as of 1:40 p.m. 

PreMarket's Prep Take: Neither hosts of the show were surprised the deal did not go through. Co-host Dennis Dick cited the market’s reaction the Snap Inc. SNAP on Friday. 

"This deal made sense to me from the start," he said. “Pinterest probably would have been hit last week off the Snap news, but today it will not.”

Noting the premarket action, the author of this article alerted investors to the former low of the move ($49.01) as a potential area of support.

The full discussion on the issue from Monday’s show can be found here:

PINS Price Action: After a much lower open ($49.64 vs, $58.96) Pinterest continued lower. It should be noted that the issue bottomed in Monday’s session just above that level at $49.10 and reversed course.  

Since peaking at $51.39, the issue is trading actively in the upper $50 handle.