Pinterest Inc. shares were rising nearly 3% in premarket trading Tuesday after Piper Sandler analyst Thomas Champion turned bullish on the internet stock, writing of “multiple tailwinds” for the company headed into the new year.
“We like the new leadership, investor activism, and we see a buyback coming,” he wrote in his note to clients as he lifted his rating on the stock to overweight from neutral. “The lows are likely already in.”
See also: Pinterest adds Elliott Management exec to its board
Champion’s recent survey of advertising buyers indicated to him that the company now has “a better product.” This sets Pinterest
up to potentially win share, in his view, as does a pullback in Twitter advertiser spending.
Additionally, Champion eas optimistic that Pinterest can build on the user-growth momentum it saw in the third quarter. “PINS provides exposure to a higher-income demographic with commercial intent,” he wrote. “Plus, we now see an entry into younger cohorts which comprises a smaller part of the base today.”
Don’t miss: Here’s why Amazon is Citi’s top internet stock idea
Pinterest has the potential to boost margins in 2023 under Bill Ready, who took over as chief executive in late June. The company’s “recent hiring spree appears halted,” Champion wrote, and since operating expenses tend to be correlated with headcount, “margins should respond given slowing growth and the benefits of scale.”
Read: Pinterest is the latest social-media company to cut staff
He also saw a likely buyback on the horizon, noting that Pinterest excited the third quarter with $2.7 billion in cash.
Champion boosted his price target on Pinterest’s stock to $30 from $25. It’s down 35% so far this year as the S&P 500 index
has lost about 16%.