Markets

Pinterest gets its first recommendation from Wall Street before it goes public

Key Points
  • London-based U.S. equity brokerage firm Atlantic Equities on Tuesday initiated coverage of Pinterest with an overweight rating and a $23 year-end price target.
  • Pinterest will list under the ticker "PINS" on the New York Stock Exchange.
  • The image-sharing social network on Monday set a price range of $15 to $17 per share for its initial public offering of 75 million shares.
  • "We believe the company's unique and broadly appealing proposition, offering consumers the ability to view and collate visual recommendations, will enable ongoing robust user growth," says Atlantic's analyst, James Cordwell.
A Pinterest banner hangs on the facade of the New York Stock Exchange (NYSE) in New York City, September 22, 2017
Brendan McDermid | Reuters

Pinterest has already earned a recommendation from Wall Street and it's not even listed on public exchanges yet.

London-based U.S. equity brokerage firm Atlantic Equities on Tuesday initiated coverage of Pinterest with an overweight rating and a $23 year-end price target. This comes one day after the image-sharing social network set a price range of $15 to $17 per share for its initial public offering of 75 million shares. Pinterest will list under the ticker "PINS" on the New York Stock Exchange.

"We believe the company's unique and broadly appealing proposition, offering consumers the ability to view and collate visual recommendations, will enable ongoing robust user growth," Atlantic's analyst, James Cordwell, said in a note to clients Tuesday.

Pinterest's price range is seen as a discount from the company's most recent valuation on the private markets, which was $12 billion in its last fundraising round in 2017. The upper end of the target range will put Pinterest at just $11.3 billion.

The social network's public offering follows ride-hailing start-up 's debut less than two weeks ago. It was not smooth sailing for Lyft as its shares went downhill after the initial pop and are still trading below the IPO price. More of the so-called unicorns, privately financed companies valued at more than $1 billion, are slated to go public this year, including Uber, Airbnb, Slack and Postmates.

Weaker engagement

While bullish on Pinterest, Atlantic Equities still has some concerns about the company's "weaker engagement" than other social media platforms like Twitter and Facebook.

"While Pinterest has a compelling use case, its lack of a material social element means engagement is less strong than at peers ... we believe its engagement metrics are materially below those of the social networks (Facebook. Twitter, Snap) due to it not having the same 'call to action' that comes from updates by friends, family and other accounts," Cordwell said.

However, Pinterest is significantly ahead of its peers when it comes to users' shopping intent, which can continue to drive ad growth, the analyst noted.

"We believe the higher purchasing intent of Pinterest's audience and its superior ad-targeting capabilities should enable it to derive superior average revenue per user to Twitter," Cordwell said.