Wells Fargo Upgrades Pinterest, Says Amazon Partnership Will Boost Shares

According to Wells Fargo, it is now an opportune time to consider purchasing shares of Pinterest.

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Wells Fargo upgraded the social media company on Tuesday, raising its rating from equal weight to overweight. Furthermore, they increased the price target on the stock from $23 per share to $34 per share. This adjustment implies a potential upside of nearly 29% from the closing price of $26.40 on Tuesday.

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In a statement, analyst Ken Gawrelski explained the rationale behind the upgrade. He highlighted Pinterest's strategic decision to outsource monetization to third parties as a means of addressing attribution and scale challenges. This includes an upcoming partnership with Amazon, set to be operational in time for the 2023 holiday season, along with potential collaborations with other established retail media networks.

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Gawrelski specified that the anticipated partnership with Amazon is expected to take effect in October. He emphasized that outsourcing efforts will support Pinterest in expanding engagement and enhancing user experience. Additionally, he projected that improved advertising capabilities would result in a significantly stronger revenue margin outlook for the company.

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The analyst also anticipates that management will provide third-quarter guidance indicating a 7% year-over-year increase in impression growth acceleration.

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However, Gawrelski acknowledged potential risks to Wells Fargo's price forecast. These include the possibility of delays in implementing the Amazon deal or a slowdown in user engagement. Pinterest is scheduled to report its second-quarter results on July 27.

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Despite the social media platform's shares underperforming the broader market this year, with a modest 8.7% increase compared to the S&P 500's 14% rise, Wells Fargo believes there is room for growth and potential value in investing in Pinterest.

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