Deutsche Bank sees compelling case to make Pinterest a core holding

Investing.com -- Deutsche Bank initiated coverage of Pinterest (NYSE:PINS ) with a Buy rating and price target of $43 in a note Monday, citing the platform's strong growth potential and its under-monetized user base.

The analysts highlight Pinterest's unique position as a "scaled, increasingly personalized 'digital catalog'" that attracts affluent users with high purchase intent.

According to Deutsche Bank, 90% of Pinterest's product searches are unbranded, offering advertisers a prime opportunity to reach consumers before they've selected a product or brand.

The analysts see Pinterest's ability to support users throughout the entire purchase journey—from inspiration to purchase activity—as making it indispensable for full-funnel advertisers.

This, combined with Pinterest's expansion into adjacent categories, is expected to drive further user growth.

Deutsche Bank is modeling a global monthly active user (MAU) compound annual growth rate (CAGR) of 6% from FY24-26, with a potential upside scenario of 9%.

In terms of revenue, Deutsche Bank forecasts an 18% growth rate over the next three years, slightly above consensus, with an upside scenario that could see a 25% CAGR.

The bank also points to partnerships and third-party demand as key contributors to international average revenue per user (ARPU) growth, helping to drive margins higher.

Deutsche Bank expects Pinterest's adjusted EBITDA margins to expand by 11 percentage points over the forecast period, with a possible 3 additional points in their upside case.

Given Pinterest's strong top-line growth potential and margin expansion, the analysts argue that its current valuation is attractive, especially compared to peers. They assign a FY26 EV/EBITDA multiple of 17x, below the peer group average of 20x, but note that Pinterest's top-line and margin characteristics may justify a premium valuation multiple in the future.

"With a clear path to both revenue and margin upside from today’s levels and valuation multiples significantly below peers, we see a compelling case to make PINS a core holding for investors," concludes the bank.

Source: Investing.com