Pinterest could jump 40% as active users gain and gross margins increase, CFRA says

Pinterest mobile app smartphone logo
  • CFRA’s John Freeman says Pinterest is a “strong-buy” and could hit $93 per share.
  • The price target implies a potential 40% jump from Friday’s intraday low.
  • This is “an attractive entry point for perhaps our favorite in social media long-term,” Freeman wrote.
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CFRA’s John Freeman upgraded Pinterest to a “strong buy” and maintained his $93 price target in a note to clients on Friday after investors abandoned the firm post-earnings.

Freeman’s price target implies a potential 40% jump in share prices from Friday’s intraday low of $66.01.

Pinterest’s revenue grew 78% year-over-year in the first-quarter, beating its own guidance and Wall Street analysts’ estimates, but that wasn’t enough to keep the stock from falling.

Shares of the social media company are down roughly 14% since management released its first-quarter earnings report on April 27.

CFRA Research’s Freeman says the drop has created “an attractive entry point for perhaps our favorite in social media long-term.”

While investors may have balked at Pinterest’s inability to grow its monthly active user (MAU) total by more than 9% in the quarter and a GAAP net loss of $22 million, CFRA believes 380 million MAUs along with consistent revenue growth is plenty to consider an investment.

Pinterest also managed to narrow its GAAP losses by 85% in the first quarter.

Freeman highlighted rising gross margins that allowed the company to narrow its losses. Gross margins were up 900 bps year-over-year in the first quarter to 73%.

The analyst also noted Pinterest’s Average Revenue Per User (ARPU), excluding the US, doubled in the first quarter versus the same period a year ago.

Freeman is forecasting Pinterest’s revenue to hit $3.92 billion by 2022 with earnings per share (EPS) at $2.43.

The analyst used a 15.5x sales multiple to arrive at his $93 price target.

Despite the weaker than expected first quarter, analysts remain mostly bullish on shares of Pinterest. The company boasts 35 “buy” ratings, 19 “neutral” ratings, and zero “sell” ratings from analysts.

Shares of Pinterest traded down 2.98% as of 3:11 p.m. ET on Friday.

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