Why Pinterest shares are worth a buy despite ‘uncertain times’ for digital ads

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According to Goldman Sachs, although the online-advertising industry is “stuck in uncertain times,” shares of Pinterest Inc. have buy-in.

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Goldman Analyst Eric Sheridan Gets Bullish on Pinterest PINS
+4.75%
Late Wednesday, the stock upgraded from neutral to buy amid optimism for the company’s efforts in commerce and its broader initiatives meant to increase monetization.

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“Despite some uncertainty around the near-term operating environment (MAU) [monthly-active-user] macroeconomic impact on growth, industry spending, competition, etc.), we view and view Pinterest positively as one of many long-term secular growth themes (engagement and advertising spend online transfer, social commerce, maker economy, etc.) More positive risk/reward skew at current levels,” Sheridan wrote.

He sees several ways Pinterest can increase its average revenue per user, including better international monetization, efforts around new “ad surfaces” like catalog pins, and inflation in CPM, or cost per 1,000 ad impressions. The company improves targeting and measuring capabilities.

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Opinion: Pinterest never considered itself a social network. So far.

Sheridan noted that Pinterest’s management team is focused on better enabling commerce through the site “by taking advantage of the platform’s unique elements with regards to higher buying intent and utilities of both search and conversion.” After speaking with executives at a recent Goldman conference, the company is looking to promote part of the “purchasable list” on the Pinterest platform.

“Our recent industry channel checks and third-party data work give us confidence in Pinterest’s ability to increase monetization and capture a greater share of advertising budget as management executes against its buy/commerce opportunity,” he wrote.

Opinion: Pinterest’s new CEO faces tough road to getting users to buy instead of just pin

Sheridan said Pinterest is “currently in the later stages of a two-year investment cycle” but he sees opportunities for margin expansion over the next three to five years as Pinterest grows average revenue per user and faces a “meaningful slowdown” in adjusted earnings. Realizes expense growth.

Shares of Pinterest are up 5% in Thursday morning trading. They are up 32% over the past three months, though they are down 49% on a 12-month basis. s&p 500 spx,
-0.31%
It has slipped 2% in three months and is down 13% in 12 months.

Credit: www.marketwatch.com /

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