Morgan Stanley has recommended buying Pinterest stock. There are three reasons for this

Morgan Stanley advised buying shares of visual search platform Pinterest, citing the company's strengths ranging from the return on AI-based innovation to its undervalued revenue growth potential. At the same time, according to the investment bank's assessment, the securities Pinterest are trading at a discount relative to its peers. 

Morgan Stanley upgraded Pinterest's stock rating from neutral "equal weight" to "overweight," which implies a buy recommendation, reports CNBC. The investment bank also raised its target price on the company's shares from $37 to $45, implying a potential upside of about 21% from Friday's closing level.

Pinterest shares jumped 4.5% in the July 21 premarket and were adding 2.6% after the main session opened. Since the beginning of 2025, the company's market value has increased by almost a third.

Morgan Stanley analyst Brian Novak highlighted three reasons why he thinks investors should buy Pinterest stock:

- GPU-based innovations that the company has been rolling out for months are starting to show real results, the investment bank points out. AI-powered technologies allow Pinterest to more precisely tailor ads and content, leading to increased effectiveness, relevancy and return on campaigns, explains Investing.com.

"We have been watching Pinterest's investment in graphics processing unit (GPU) technologies and the gradual growth in user engagement and monetization for several quarters," said Novak. - For the second half of the year, we are changing our outlook to positive as we believe the impact of these investments will lead to an under-appreciated acceleration in growth and stronger profitability." 

- The company's attractive valuation. Pinterest's stock still trades at a discount of about 16% compared to peers on a growth-adjusted basis, Investing.com points out. The company has the same valuation gap relative to rival Snap, with Pinterest expected to grow 1.5-2 times faster than it and deliver adjusted EBITDA margins 2-3 times higher, the publication writes. Pinterest's stock multiple, which reflects the ratio of price to expected revenue, is 13.2. By comparison, the S&P 500 index has a multiple of more than 26, according to Bloomberg. 

- The market underestimates the platform's revenue growth, according to Morgan Stanley. According to the bank's forecast, this indicator will increase by 17-18% in the second half of the year compared to the same period in 2024. Over the past 12 months, Pinterest's revenue has added 17.8% and its gross margin has reached 79.6%.

"Historically, technology companies that show accelerating growth and expanding margins have higher returns. We believe Pinterest is poised to replicate this dynamic, especially if it begins to be seen as a beneficiary of the trend toward GPUs and generative AI," the analyst said.

The company will release its second-quarter results on August 7.

KeyBanc last week reiterated a buy recommendation on Pinterest stock, but lowered its target price to $40 - it expects the company's third-quarter outlook to match market estimates. 

In contrast, TD Cowen Investment Bank raised the target target to $43 a couple days earlier, citing positive signals about the advertising business and an expected 14.6% revenue growth for the second quarter.

Wells Fargo analysts raised their target price to $42, citing strong user base growth and improving margins. Their revenue forecast for the company calls for a 15% increase. 

A total of 35 analysts out of 43 follow from MarketWatch data gave advice to buy Pinterest stock. They have given the company Buy and Overweight ratings. Seven have a neutral (Hold rating) on the stock and only one recommends selling it (Sell). Wall Street's average target price is 11% above its last close on Friday, July 18th.

This article was AI-translated and verified by a human editor