Shares of Pinterest (PINS 2.04%) rose by as much as 6% today after getting a price-target bump from Wall Street. Wells Fargo boosted its valuation estimate from $75 to $85.
Analyst Brian Fitzgerald reiterated an overweight (equivalent to a buy) rating on the social media tech company. Even after tech stocks enjoyed an incredible rally in 2020, Fitzgerald believes that the sector will maintain that momentum in 2021 as macroeconomic conditions improve. Vaccine distribution is ramping up and lockdown restrictions are easing around the world, and a third stimulus package is expected to be passed soon in the U.S.
Meanwhile, the analyst believes that Congress remains too divided to pass a tax increase until the broader economic recovery takes hold.
The price-target adjustment comes after social media giant Facebook reported strong fourth-quarter results that showed strengthening monetization across all markets, which is giving investors optimism around peer social media platforms that similarly rely predominantly on advertising revenue.
Hope that Pinterest will be able to improve its own monetization is core to the bullish thesis. The company's average revenue per user (ARPU) in the third quarter was just $1.03 worldwide. U.S. ARPU is much stronger at $3.85, while international ARPU was a mere $0.21. With nearly 80% of monthly active users (MAUs) being abroad, boosting international monetization is critical for Pinterest's long-term prospects.
Pinterest is scheduled to report fourth-quarter results on Feb. 4 and the company expects revenue to grow by approximately 60%.