The tough times are not over for Pinterest (NASDAQ: PINS) and other social media stocks like Meta Platforms but the analysts are calling a bottom. While none of them have come out to use the word bottom their sentiment and improving trends within the business have the stock up off its 2022 lows and in a position to rebound in 2023.
While the Q4 report was lackluster, mixed, tepid and without a major catalyst, the analysts have come out to support the business and the stock price. Marketbeat.com’s analyst tracking tools have picked up 6 commentaries since the report was released and are all supportive of the market.
Pinterest is pegged at a firm Hold leaning toward Buy with a range of targets from Neutral to Overweight. No Sell or equivalent ratings are going back for at least 3 years, and the price target news is biased to the upside as well. The 6 new targets include 5 increases and 1 decrease from JPMorgan Chase.
They lowered their target by $1 to $27 which is consistent with the new consensus target. The other 5 all increased theirs with a target ranging from $22 to $32 which assumes a range of -16% to +18% relative to the post-release price action. The bottom line, volatility may still be present but the low end of the range is firming, and the consensus is edging upward, and that should mark a bottom in the price action as well.
Business Trends Improve
Pinterest’s Q4 results were mixed in a good way that reveals it’s the economy and not the business that is the problem. The company grew revenue by 3.6% versus last year but missed the consensus mark by a slim margin. This is bad news but is offset by margin strength that left the bottom line $0.29 in adjusted EPS, a penny better than the consensus.
What this means is that profitability is improvising in the face of tepid growth, and that is great news for investors. Ad spending is sluggish and weighing on near-term results, but the internal metrics have the company set up for leverage growth once the economy is reinvigorated.
Until then, investors can focus on the longer-term trends which point to improving user count, engagement and monetization.
“2022 was a solid year as we returned to MAU growth, deepened engagement and saw our personalization and relevance investments start to pay off,” said Bill Ready, Pinterest CEO. “We’re building upon this foundation by staying focused on growing monetization per user, integrating shopping throughout the core user experience, and increased driving operational rigor. While the industry as a whole is facing headwinds, we are adapting quickly to a changing macro environment and are committed to creating a more positive online experience for our users and advertisers.”
The Institutional Tide Is Shifted
Institutional selling is a big factor in why Pinterest shares are trading where they are today. The institutions shed about $27 billion worth of stock in Q4 2021, which is worth more than the entire company today. The salient point is that there has been no major selling since then, and each quarter since has netted shares for the group.
Assuming this trend continues, not improves continues, it should help support the market if not drive it higher. If the institutions start buying shares in masse, a new uptrend is all but assured.
The price action shows Pinterest at the bottom, but the market is yet to get behind the move. This leaves the door open for a retest of support that could move as far down as the $20 level. Assuming the market acts on this opportunity, there should be clear signs of support at or above the $20 level, and that will be the signal to buy.