Why Pinterest Stock Jumped in Early Trading on Tuesday

Shares of Pinterest (PINS 2.12%) jumped by as much as 7% on Tuesday morning after analysts said that the image-centric social media platform operator is exploring a partnership with tech titan Alphabet (GOOG 1.00%) (GOOGL 1.08%). As of 12:17 p.m. ET, those gains had moderated, and Pinterest stock was only up by 2.1%.

What’s going on with Pinterest?

According to analysts with Piper Sandler, Pinterest may be testing a U.S. partnership with Alphabet’s Google. According to Investing.com, the analysts examined the code on Pinterest ads, leading them to believe that there’s a partnership between the two companies.

To be clear, this wouldn’t come as a total shock. In 2023, Pinterest opened its platform up to third-party ads through a partnership with Amazon. And in February, the company said that it had partnered with Google to start monetizing select international markets.

However, Pinterest’s management has indicated that it plans to have more third-party U.S. ad partners. Therefore, a potential partnership with Google has support based on management’s past commentary.

What it means for investors

A partnership with Google would be meaningful for Pinterest. The company has an active user base of around 500 million people per month, but this audience has historically been under-monetized compared to the audiences of comparable platforms.

That said, Pinterest’s revenue growth has started accelerating since it opened its platform up to third-party ads. This trend could intensify if the company is indeed working on a new deal with Alphabet.

This is one of the reasons that I believe Pinterest stock is a good buy right now.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jon Quast has positions in Pinterest. The Motley Fool has positions in and recommends Alphabet, Amazon, and Pinterest. The Motley Fool has a disclosure policy.

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