Guggenheim sees strong monetization growth in Pinterest as it upgrades stock

Investing.com -- Guggenheim upgraded Pinterest (NYSE: PINS) to Buy from Neutral and slightly raised its price target to $40 from $39 as it sees strong fundamentals and significant growth potential in user engagement, monetization, and profitability.

“We believe that the recent share price pullback creates an attractive opportunity to invest in the still early-stage global user, monetization and profit growth opportunity at Pinterest,” Guggenheim said.

The firm expects monetization to grow at above-market rates from 2025-2027, driven by continued volume growth and AI-enabled ad performance improvements.

Data analysis indicates that user growth remained strong in Q1, with net additions of 14 million monthly active users (MAUs), surpassing consensus estimates of 11 million.

“The company is also at record highs on engagement per user and is attracting younger demographics (Gen-Z is 40% of platform usage) in the mobile environment,” Guggenheim note highlighted.

Advertising formats continue to perform well, with over 90% growth in clicks to advertisers and strong demand for first-party ads.

Additionally, partnerships with Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOGL) are enhancing domestic auction density and expanding international monetization.

Innovation is supporting further revenue growth with AI-enabled ads driving improved recommendation relevancy, and AI-based Performance+ automation suite further enabling advertiser efficiency and return on ad spend.

Sustained mid-teen revenue growth is enabling incremental investments while driving GAAP profitability and free cash flow. Guggenheim’s price target is based on 34x 2026 OIBDA, consistent with profit growth forecasts and current trading multiples for peers.

Despite macroeconomic concerns in the ad market, Guggenheim sees Pinterest’s performance-based advertiser exposure, accounting for over two-thirds of revenue, as a relative advantage compared to companies with greater brand exposure.

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