By Emily Bary
Stock shoots up to 40% higher as Pinterest highlights surge in pandemic users, analysts point to greater convergence between social media and online shopping
Pinterest Inc. shares zoomed as much as 40% higher Thursday after the company easily topped earnings expectations, potentially adding $10 billion in market cap to a company that was valued at roughly that much when 2020 began.
Shares of Pinterest (PINS) moved as high as $68.93 in Thursday morning trading, 40% higher than Wednesday's closing price. The stock eventually settled at gains closer to 30% later in the session, but was still cruising toward a new all-time closing high, as Pinterest has never finished a trading day above $53.
Pinterest's market cap was headed toward a gain of $9 billion to $10 billion, making Pinterest worth roughly $38 billion. At the beginning of 2020, Pinterest was worth between $10 billion and $11 billion in total.
Read: Pinterest's pandemic surge continues, stock jumps toward fresh record highs ()
The results were enough to earn Pinterest at least two upgrades, from MKM Partners analyst Rohit Kulkarni, who bumped his rating on the stock to buy from neutral, and from J.P. Morgan'sDoug Anmuth, who moved to overweight from neutral.
"We believe the pandemic has led to a fundamental change in the way consumers shop online and how social media can play a bigger role in shopping going forward," MKM's Kulkarni wrote. "And, we believe that the recently observed post-pandemic trends at Pinterest are just the beginning of a long-term virtuous cycle between user growth, user engagement, advertiser demand, and monetization."
Kulkarni, who also increased his price target to $66 from $35, is upbeat about the improvements Pinterest is making to its platform. Upgrades to programmatic and self-serve ad tools, as well as more integrations that allow for e-commerce purchases, could "serve as material 2021 upside catalysts," he wrote.
J.P. Morgan's Anmuth acknowledged that he's late to the game with his upgrade but wrote that he still sees "much room ahead" for Pinterest. "While Pinterest has long had a user base with high commercial intent, we are now getting a glimpse of what monetization and profit can look like," he said in a note to clients, while raising his price target to $75 from $57.
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Wedbush analyst Ygal Arounian was encouraged by the company's advertising momentum. "First, while strength among [small business] advertisers remained strong, Pinterest saw strength return from [consumer-packaged-goods] and large omnichannel retailers," he wrote. The company may have benefited somewhat from ad boycotts on other social-media platforms, but Arounian remains upbeat about Pinterest's ability to maintain its traction with advertisers given that its platform offers a "brand-safe environment" that's increasingly of interest to advertisers.
He has an outperform rating on the stock and raised his price target to $74.00 from $58.74.
Bernstein analyst Mark Shmulik wrote that the company has been acting quickly to try to win "the digital shopping mall race" and capitalize on surging engagement during the COVID-19 crisis. "Pinterest is acting with an urgency we haven't seen before, launching a plethora of new ad products including branded pages, product tagging, collection ads and retail stories," he wrote.
The company's user base is "valuable and growing" given management's comments around the strong purchasing intent of Pinterest's newest crop of users, but the key question for Shmulik is whether Pinterest can hang on to this part of the audience going into next year "given their engagement ebbs and flows with lockdowns/reopening."
He raised his price target to $60 from $41 but maintained a market perform rating on the stock.
At least 13 analysts hiked their price targets on Pinterest shares after the report, according to FactSet. Of the 29 analysts tracked by FactSet who cover the stock, 18 have buy ratings, nine have hold ratings, and two have sell ratings, with an average price target of $63.19.
Pinterest shares have now more than tripled so far this year, as the S&P 500 has risen 1.3%.
-Emily Bary; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
October 29, 2020 14:10 ET (18:10 GMT)
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