D.A. Davidson Initiates Coverage, Favoring Pinterest With 'Buy' Rating Over Snap's 'Neutral'

In a new research note, brokerage firm D.A. Davidson initiated coverage on Pinterest (PINS) and Snap (SNAP), giving the two social media companies diverging ratings. Analyst Wyatt Swanson rated Pinterest a Buy with a $26 price target, while Snap was started at Neutral with a $5 price target.

For Pinterest, Swanson highlighted the platform's shift "from curation to conversion." The analyst noted that Pinterest has achieved ten consecutive quarters of low double-digit year-over-year engagement growth and mid-to-high single-digit growth in global average revenue per user (ARPU). Swanson also pointed to the platform's search-oriented nature, with approximately 80 billion monthly searches, as an underutilized commercial opportunity.

The firm is particularly optimistic about Pinterest's automated advertising tool, Performance+. According to the note, about 30% of Pinterest's lower-funnel revenue is now generated through the tool, and advertisers who adopt it are increasing their spending at nearly twice the rate of those who do not.

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Regarding Snap, the analyst expressed concern over persistent weakness in North American engagement, where daily active users fell 7.1% year-over-year in the first quarter. Advertising revenue growth was also modest at just 3% during the same period. While Swanson noted that Snap's subscription business, which recently surpassed a $1 billion annualized revenue run rate, appears to be "underappreciated by investors," the overall outlook remains cautious.

The analyst also took a cautious view of Snap's forthcoming augmented-reality glasses, priced at $2,195. Swanson estimated low first-year sales and expects the hardware business "to continue pressuring margins for the foreseeable future."