Pinterest Inc (NYSE:PINS) stock fell 2.92% (As on September 21, 11:38:11 AM UTC-4, Source: Google Finance) after the company was raised to Buy/High Risk from Neutral at Citi with a $36.00 price target, up from the prior $31.00. The move came after Citi analysts attended the image sharing platform’s analyst day, which gave them confidence in the ongoing turnaround there and in the shares’ “positive” risk-reward. The analysts wrote to clients that they were “incrementally confident that engagement can continue to ramp, that ads innovation and its full-funnel approach to advertising can deliver improving monetization trends, and that adj. EBITDA margins can expand going forward.” “Simply put,” they added, “we believe Product investments over the past year+ are improving the user experience and we note greater relevance and personalization of content across the platform.”

Earlier, Evercore ISI upgraded the company to Outperform from In Line and raised its price target to $41.00 from $30.00. The rating change was based on several factors, including clear evidence of Digital Ad spend stabilizing, moving away from trough levels of late ’22, and showing tentative evidence of an H2 recovery. Operational improvements implemented by new CEO Bill Ready, leading to positive outcomes for both users and advertisers. Combination of the first two reasons creating a fundamental inflection point, with the expectation of significant revenue growth acceleration, substantial margin expansion, and high double-digit EBITDA growth (e.g., 50%+ Y/Y in Q4) over the next 2-4 quarters. This growth potential is likely to result in a re-rating of PINS shares. Current valuation (27X ’24 EV/EBITDA & 21X ’25 EV/EBITDA) considered reasonable for a company with the potential to sustain 30%+ EBITDA growth and a track record of consistent free cash flow (FCF) generation. The company is also expected to deliver 20%+ FCF margins by 2025.

Meanwhile, in the second quarter, the company had successfully returned to strong user and engagement growth while delivering consistent year-on-year revenue growth and returning to margin expansion despite the downturn in the advertising environment. Global Monthly Active Users (MAUs) increased 8% year over year to 465 million and have grown more than 30 million over the last 12 months. Engagement metrics such as sessions, impressions, and saves grew substantially faster than the users across all of the regions over the same period. In Q2, the company had expanded the use of GPU serving from core engagement AI models to our ad delivery models, which enabled the company to use models that are 100x larger than before in ads, as well as organic. The cumulative impact was a 5% reduction in cost per action and over 10% lift in click-through rates.