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It might be time to rethink
Pinterest
stock as the company struggles to maintain user growth and ad revenue, one analyst says.
Morgan Stanley analyst Brian Nowak downgraded
Pinterest
stock (ticker: PINS) Tuesday to Equal Weight from Overweight. He lowered his target for the stock price to $30 from $53.
Shares of Pinterest are down about 27% year to date at near $26.40, while the
Dow Jones Industrial Average
has fallen 4%.
“We see multiple larger forward [revenue] headwinds as PINS’ user and time spent trends are challenging,” Nowak wrote in a research note. He estimates the total amount of time U.S. users spend with the app has fallen to 2017 levels. This is an issue, he said, because user engagement is what drives revenue for the image-sharing app.
Pinterest didn’t immediately respond to a request for comment.
Pinterest has had issues driving user retention and growth, Nowak said. While other social networks have been fighting for consumer attention by adding short videos like
Facebook
’s
Reels, Pinterest has only recently shifted toward that model.
While this form of content creation can prove fruitful for companies, Pinterest has a way to go before it can ensure ads shown with its videos aren’t intrusive to user engagement and experience, he said. Bringing in revenue could be slow given the high competition the company faces from other social media apps, Nowak said.
“We also think larger platforms with more engineers, ad sales people and existingadvertisers [Facebook/Google] will be advantaged in their ability to monetize thisformat over smaller players like PINS,” Nowak said.
Nowak said he expects engagement and time spent to remain weak and that the shift toward videos will weigh on revenue more than he had expected.
Write to Logan Moore at logan.moore@barrons.com.
Read More: Pinterest Has Challenges Ahead, Analyst Says. He Downgraded the Stock.