Goldman Sachs likes Pinterest even after Q4 revenue miss, says long-term catalysts still in place

Published Tue, Feb 7 20237:40 AM EST

Pinterest is still on track for gains despite posting mixed fourth-quarter results, according to Goldman Sachs . Analyst Eric Sheridan reiterated his buy rating on Pinterest after its earnings announcement on Monday. He noted that while Pinterest's overall reported monthly active users missed estimates, it still managed to reach its highest level of engagement. The company's long-term revenue outlook is also promising for investors, according to the analyst. "While overall reported MAUs missed our estimates, the company's efforts to stimulate engagement seem to be bearing fruit with disclosure that its WAU-to-MAU ratio hit an all-time high," Sheridan wrote in a Tuesday client note. "Pinterest management continued to emphasize their focus on making progress toward key long-term revenue growth initiatives (shopping/commerce, depth of engagement across media types, international monetization, etc.) that, coupled with a positive user growth narrative, sets up the platform for sustained above-industry average revenue growth over the next 2-3 years," he said. The analyst also noted that management's "focus on reprioritizing investments" could help Pinterest grow margins and long-term profitability. Sheridan maintained his price target of $30 per share on Pinterest, implying a 9.2% upside from the stock's closing price of $27.48 as of Monday. Goldman Sachs noted that a difficult macro environment has been weighing upon certain segments, particularly small and mid-market advertisers of consumer packaged goods. However, Sheridan anticipates that the company's upcoming $500 million share repurchase authorization plan will offset some of the short-term demand challenges. To be sure, not all firms are as optimistic. Credit Suisse analyst Stephen Ju was more bearish on the stock. He reiterated his neutral rating on Pinterest shares and issued a price target of $26 per share, implying downside of 5.4%. Ju also pointed to increased competition and a macroeconomic downturn as notable risks for the stock. JPMorgan lowered its price target to $27 from $28 and maintained its neutral rating for the stock. Analyst Doug Anmuth praised the company's cost discipline and commitment to margin expansion. However, he reduced his 2023 revenue forecasts by 5% due to the same macro environment challenges that the other analysts also noted. "Overall, we remain Neutral-rated while we watch for the new CEO's impact on MAUs and the overall user experience, along w/improved monetization, while driving cost efficiencies, all into an uncertain macro environment," Anmuth added. Pinterest shares were down almost 1% during premarket hours on Tuesday. The stock has rallied almost 22% in 2023 as part of the broader tech rally in January. Shares have also gained 5.4% in the last 12 months. PINS YTD mountain PINS in 2023 —CNBC's Michael Bloom contributed to this report.