Shares of Pinterest (NYSE:PINS) briefly jumped as much as 5% this morning after Credit Suisse raised its price target on the stock. As of 12:15 p.m. EST, Pinterest shares have given up most of those gains and are up less than 1%.
Credit Suisse remains neutral overall but raised its price target from $66 to $74. Analyst Stephen Ju acknowledges that Pinterest is executing well but has concerns around the social media technology company's valuation. Pinterest stock has more than tripled over the past year. Ju is boosting revenue estimates based on higher forecasts for average revenue per user (ARPU).
"We are raising our advertising revenue forecasts based on positive advertiser checks signaling higher-than-expected budget growth," the analyst wrote in a research note to investors. "In particular, we believe contributions from verticals in which Pinterest has more exposure all outperformed our expectations in the aggregate during 4Q20."
Credit Suisse is modeling for fourth-quarter revenue to jump by 63%, up from its prior forecast of 60% growth. Pinterest's guidance calls for sales to increase by 60% in the fourth quarter. Search queries on the platform are starting to move away from COVID-19-related topics and toward other use cases that "have higher commercial intent," according to Credit Suisse.
That should allow the company to keep moving down its marketing funnel and create greater value for advertising inventory. Pinterest launched a partnership with e-commerce specialist Shopify last year, which Ju is optimistic about.