There are times when stocks fall on what might seem to be otherwise good news. There are also times when analysts on Wall Street issue calls that go against reactions to big news. This is the case of Pinterest, Inc. (NYSE: PINS) after its earnings was followed by a sharp sell-off in the shares.
Dear Wall Street: Is the drop in Pinterest’s stock the right call in the earnings aftermath, or are the analyst price target hikes the right call?
PINTEREST GOES DOWN, BUT…
Shares of Pinterest closed down 10.3% at $35.13 on Friday. Its trading volume of more than 37 million shares represented more than a 3.5-times volume spike. Usually big percentage losses on exponential trading volume end up being the right call. Usually.
Investors should keep in mind that Pinterest shares had already risen 35% YTD, versus a gain of almost 8% for the S&P 500. The exposure to artificial intelligence was a driving force for the gains this year. Unfortunately, Pinterest’s management commentary pointed out that Asia-based advertisers for retail and e-commerce had pulled back on ad spending around the “de minimis exemption” in the tariff scenario.
The image-sharing service provider reported somewhat disappointing second-quarter earnings. The report of $0.33 EPS and $998 million in revenues came in versus consensus estimates of $0.35 EPS and revenue of $975 million. Pinterest’s guidance for next quarter’s revenue of $1.033 billion to $1.053 billion didn’t do enough to bring investors in and the initial after-hours reaction on Thursday evening was an 11% drop.
Wall Street’s analysts are now focused on the shares going higher over the coming year. And Wall Street is now pegging Pinterest to be a $1+ billion company in quarterly revenues ahead even outside of the important Q4 holiday spending period. Still, a large drop like this has to mean that someone is wrong here. Or does it?
WALL STREET GOES UP, BUT…
Here is how Wall Street analysts have responded to the drop in Pinterest after earnings.
BofA Securities reiterated its Buy rating, raising its price objective to $44 from $41. The firm raised its revenue forecast based on a higher number of users and monetization.
Citigroup reiterated its Buy rating, raising its target to $50 from $44. It sees accelerating revenue and monthly active user growth, and recommended that investors add shares or take new positions into the post-earnings sell-off.
Evercore ISI reiterated its Buy rating and $50 price target.
Goldman Sachs reiterated its Buy rating and $43 price target.
Monness Crespi Hardt reiterated a Buy rating and raised its target to $46 from $40, noting enhanced support for advertisers, expanded shopping capabilities, an upgraded user experience infusing AI across its platform and that Pinterest has tapped into third-party advertising partners.
Morgan Stanley reiterated its Overweight rating after having upgraded the stock to Overweight from Equal Weight on July 21.
Oppenheimer reiterated its Outperform rating, raising its target to $44 from $40.
Stifel reiterated its Buy rating, raising its target to $47 from $46.
Susquehanna reiterated its Positive rating and $42 price target.
Wedbush reiterated its Outperform rating, raising its target to $44 from $42. The firm maintained that the sell-off was an unwarranted reaction.
Wolfe Research reiterated its Buy rating and $43 price target.
Barclays maintained its Equal-Weight rating, but still raised its target to $35 from $34.
Piper Sandler maintained its Neutral rating, but still raised its target to $35 from $34.
Raymond James maintained its Hold rating.
And, there you have it. Most analysts either maintained an already-positive stance or at least raised their price targets even if their ratings were less aggressive. Again — are Wall Street analysts right about much more upside ahead, or was the big post-earnings drop in Pinterest shares the right reaction?
DISCLAIMERS
The analyst ratings and price targets mentioned above for Pinterest have been credited to each form by name. Oggonomics does not have any formal ratings and does not maintain any price targets of its own on the stocks mentioned above.
Investors should keep in mind that analysts sometimes get their thesis and outlook wrong, and market/company fundamentals can change from positive to negative in an instant. Interpretations of how positive or negative the analyst calls are can also wildly vary from investor to investor.
No analyst ratings and price targets, even those with the strongest conviction or strongest pessimism, ever come with any guarantees of profits. Analyst reports also never have money-back guarantees in the event that investors lose money.
