Pinterest Inc (NYSE:PINS) has been added to Goldman Sachs’ Americas Conviction List, with analysts seeing the company as a “well-positioned, profitable, compounder in the digital advertising space.”
In a note to clients, analysts wrote that they continue to expect Pinterest to deliver compound topline growth at a mid-to-high teens percentage pace and steady adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin expansion of about 300 basis points per year for the next five years, both of which are above current buyside expectations put it on a path to GAAP earnings per share (EPS) that implies it trading at a price to earning ex-cash multiple similar to Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB).
They see several drivers for steady average revenue per user (ARPU) growth from Pinterst’s existing user base.
This includes continuing to build out its direct-response ad business; scaling third-party demand partnerships, including Amazon and Google; and diversifying its advertiser base to include new verticals and small and medium businesses.
Further, channel checks indicated steadily improving user growth and engagement trends at Pinterest, including in key demographics such as younger users and on its mobile app.
Upcoming catalysts include the fourth quarter holiday season, which is notable due to its vertical exposure to retail, eCommerce, and Consumer Product Group advertisers.
The analysts awarded Pinterest a $46 price target, which traded 3% higher on its inclusion in Goldman Sachs’ list at $34.
The firm also removed ‘Buy’-rated Amazon.com Inc (NASDAQ:AMZN) from its Americas Convictions List after 488 days on the list.
They did not state the reasoning behind Amazon’s removal from the list but noted that there are many reasons a stock can be removed from the list.
In short, names will be removed if it is no longer considered a top investment idea across the Americas coverage, analysts wrote.