What happened
Shares of image-browsing social platform Pinterest (PINS 0.78%) jumped higher on Wednesday after a prominent analyst said that the company has an important catalyst for the business. As of 10 a.m. ET, Pinterest stock was up 6%.
So what
The analyst in question is Ken Gawrelski of Wells Fargo. According to various reports, Gawrelski upgraded Pinterest stock today from a hold rating to a buy rating. According to TipRanks, his price target for Pinterest stock is now $34 per share, which implies more than 20% additional upside from where it trades right now.
As of this writing, Pinterest stock is only up about 30% over the past three years, trailing the 45% return for the S&P 500. And a big reason for this underperformance is its current lack of revenue growth. The company's revenue was only up 5% year over year in the first quarter of 2023.
However, Pinterest made a deal with Amazon near the end of April and this is where Gawrelski sees promise. The Wells Fargo analyst believes this partnership could reinvigorate Pinterest's growth. This is why he believes it's a stock to buy and it's why the market was excited today.
Now what
Much of an investment thesis in Pinterest stock relates to its ability to monetize its audience -- an audience that seems predisposed to make online purchases. In this way, partnering with Amazon -- the largest U.S. e-commerce player -- makes sense.
Amazon will place ads on Pinterest, which is the first time Pinterest is allowing third-party ads. But for those hoping that this indeed reinvigorates Pinterest's growth, it's important to note that the company doesn't expect these ads to roll out immediately. The original press release said it will take multiple quarters. Therefore, even if this is a great partnership, investors will need to be patient to see the fruits of it.
