This analyst favors Pinterest over Snap in new coverage launch

Investing.com -- Brokerage firm D.A. Davidson began coverage of the two social media platforms this week, rating Pinterest a Buy while starting Snap at Neutral.

Analyst Wyatt Swanson set a $26 price target on Pinterest and a $5 target on Snap. He described Pinterest as moving "from curation to conversion," noting the platform has grown year-over-year engagement in the low double digits for ten straight quarters while global average revenue per user (ARPU) has grown in the mid-to-high single digits.

Despite that performance, "PINS valuation has continued to decline even though competition for both engagement and advertiser spend has continued to increase," Swanson said.

The analyst views Pinterest as "a vibe curation and inspiration platform that is more episodic than habitual," but pointed to the platform’s search-oriented nature — roughly 80 billion monthly searches, about half of them commercial — as an underused opportunity.

Swanson is particularly positive on Pinterest’s automated ad tool, Performance+, highlighting that roughly 30% of lower-funnel revenue now flows through it and that adopters are growing lower-funnel spend "at nearly twice the rate of non-adopters."

For Snap, Swanson flagged persistent weakness in North America engagement, where daily active users declined 7.1% year-over-year in the first quarter, and advertising revenue growth of just 3% in the same period. The analyst feels more upbeat on Snap’s subscription business, which surpassed 25 million subscribers and hit a $1 billion annualized revenue run rate in February, calling it a segment that "appears to be underappreciated by investors."

Snap’s forthcoming Specs augmented-reality glasses, priced at $2,195 and set to launch in the U.S., U.K. and France this fall, also drew a cautious view. Swanson estimated first-year sales of just 25,000 to 105,000 units and said he expects the hardware business "to continue pressuring margins for the foreseeable future," even as the company has acknowledged it won’t be broadly adopted at that price point.

Regarding the stock’s valuation, the analyst noted Snap has historically traded at a premium to Pinterest but has recently slipped to a discount following softer first-quarter results and the Specs unveiling, with its EV/EBITDA multiple compressing from roughly 15x at the start of the year to about 7.5x by early July, near its lowest level on record and well below its one-year average of 18x.

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