Shares of Pinterest (PINS -4.03%) were up 3.8% as of 12:19 p.m. ET on Wednesday after receiving an upgrade from Wolfe Research analyst Deepak Mathivanan.
The analyst believes the stock can outperform over the next 12 months with former PayPal executive Bill Ready stepping in as the social media platform's new chief executive officer.
A slowing online advertising market and weak user growth trends have weighed on Pinterest in 2022. Year to date, the shares are down 37%, underperforming the S&P 500's loss of 17%.
Ready steps in during a challenging time for the company. Pinterest has reported decelerating revenue growth on top of a 5% decline in monthly active users in the second quarter. These numbers are far removed from the 50% revenue growth levels Pinterest reported between 2018 through 2021.
Pinterest has an inherently valuable base of over 400 million monthly users who come to the app looking for ideas, with an intent to buy something. This is Pinterest's main value proposition to advertisers, and Mathivanan believes Ready can help the business achieve its potential.
Over the next year, Mathivanan believes Pinterest will see stability in monthly active users and advertising revenue. The latter should come naturally once the economic headwinds fade away.
Bill Ready was very successful helping PayPal deliver terrific growth in customer engagement after the spinoff from eBay in 2015. He appears to be a great fit for Pinterest, which has roughly the same level of users as PayPal does customer accounts. But what PayPal doesn't have is Pinterest's tools to help users get inspired before they go shopping.
Ready's background cultivating a large base of highly engaged e-commerce users at PayPal could unlock tremendous value for Pinterest as it seeks to bring together users' purchase intent and planning behavior on the platform. Considering this, Wall Street might be severely undervaluing this social media stock at these lower share prices.