After the earnings beat, Truist analyst Youssef Squali upgraded Snap to Buy on "strong" advertiser activity
Shares of Pinterest (PINS) are on the rise on Wednesday after both Bank of America analyst Justin Post and Goldman Sachs analyst Heath Terry upgraded the stock to Buy following Snap's (SNAP) earnings beat. Post reads the latter's better than expected quarterly results as another sign of a strong online advertising rebound, an opinion shared by his peer at Goldman.
ONLINE ADVERTISING REBOUND: Bank of America analyst Justin Post upgraded Pinterest to Buy from Neutral with a $58 price target after Snap announced third quarter revenues that were significantly above consensus, which he reads as another sign of a strong online advertising rebound. While he has been hesitant on Pinterest's valuation and "uneven growth," Post said that advertising checks give him confidence in the company's strong user intent and ad platform innovation.
Goldman Sachs analyst Heath Terry also upgraded Pinterest to Buy from Neutral with a price target of $61, up from $37. Based on current app download data, Pinterest's "strong" user growth continued through third quarter, Terry told investors in a research note. The analyst noted that field checks, along with Snap's third quarter results, suggest that advertiser demand strengthened over the course of the quarter, particularly for smaller platforms like Pinterest, Twitter (TWTR), and Snap. Terry believes Pinterest's long-term monetization opportunity should drive further outperformance of the shares given the "early stage nature" of the company's advertising technology and sales investments, particularly outside the U.S.
SNAP RESULTS: Snap reported third quarter adjusted earnings per share of 1c and revenue of $678.67M, both above consensus of (5c) and $549.99M, respectively. The company also said that DAUs were 249M in the third quarter, an increase of 39M or 18% year-over-year. DAUs increased sequentially and year-over-year on each of iOS and Android platforms. The average number of Snaps created every day grew 25% year-over-year.
In prepared earnings call remarks, Snap said that, "Similar to last quarter, we do not intend to provide financial guidance for Q4, but we do want to share some perspective on how we believe the quarter might unfold. […] Assuming that the current favorable operating conditions persist, and that the holiday season materializes in line with what we have experienced in prior years, we believe that year-over-year revenue growth of 47% to 50% is attainable in Q4."
After the third quarter earnings beat, Truist analyst Youssef Squali upgraded Snap to Buy from Hold with a price target of $43, up from $25. The analyst noted that the quarter showed a "strong" advertiser activity, with the company looking to have made it back "to the other side of the pandemic" earlier than expected. Squali added that Snap's results outperformed expectations "on all metrics," with strong user growth and monetization reflecting the company's "improvements in the app infrastructure and accelerated product cadence for consumers."
PRICE ACTION: In morning trading, shares of Pinterest have gained almost 12% to $50.68, while Snap's stock has jumped about 31% to $37.36.