Jefferies Downgrades Pinterest Amid Slower Growth Concerns
Jefferies has made a significant adjustment to Pinterest Inc (NYSE: PINS), lowering its rating from 'Buy' to 'Hold'. This change comes as the firm raises concerns over the company’s growth prospects and profitability, particularly in light of changing advertiser budgets. The price target for Pinterest shares has also been revised down from $40 to $32.
Factors Influencing the Downgrade
Three main reasons have been highlighted for this downgrade. Firstly, there is a slower adoption rate of Pinterest's new advertising products, particularly Performance+. Secondly, Jefferies notes that margin expansions have peaked after two years of optimizing infrastructure costs. Lastly, there are difficulties in getting advertisers to shift from experimental spending to consistent 'always-on' performance campaigns, which are vital for Pinterest's revenue model.
Concerns Over Revenue Growth Estimates
The firm raised alarms about existing expectations within the industry, particularly concerning mid-teens revenue growth forecasts for the first quarter of 2025. Jefferies has taken a more conservative stance, predicting that these projections are overly optimistic. Their own estimates place them 4% lower than the consensus for FY25 EBITDA, indicating the possibility of a downturn.
Pinterest's Share Performance
Pinterest's share price performance has suffered, falling by 22% year-to-date. Currently, shares are trading at a disappointing 12 times FY26 EBITDA, marking the lowest multiple the company has seen since 2022. Jefferies supports this reduced valuation, suggesting that downward revisions in growth expectations are likely.
Challenges in Ad Spending
Despite some improvements with direct response tools such as Direct Links, Jefferies cautions that Pinterest's strategy to encourage sustained advertising spending may require more time to achieve fruitful results. An analyst from Jefferies expressed that they are "still waiting for a breakout," highlighting the uncertainty surrounding Pinterest's market position and strategy execution.
Frequently Asked Questions
What rating has Jefferies given to Pinterest?
Jefferies has downgraded Pinterest from 'Buy' to 'Hold'.
What is the new price target for Pinterest shares?
The new price target for Pinterest shares is $32, down from $40.
Why is Jefferies concerned about Pinterest's growth?
Concerns stem from slower adoption of advertising products and difficulties transitioning advertisers to consistent campaigns.
How much have Pinterest shares fallen this year?
Pinterest shares have fallen 22% year-to-date.
What challenges is Pinterest facing in ad spending?
Pinterest struggled to shift advertisers from experimental budgets to sustained ad campaigns, impacting overall spending efforts.
