Pinterest (PINS) stock jumps 14% after Elliot Capital Management stake – could this be the comeback?

Pinterest (PINS) stock is once again soaring in Friday's premarket as it did after-hours on Thursday when the Wall Street Journal reported that hedge fund Elliot Capital Management has taken a 9% stake in the social media platform.

Also read: Meta Platforms (META) Stock Deep Dive: Facebook parent price target at $200 despite macro headwinds

PINS is trading up 14.2% at $20.05 in the premarket, about $1 below the descending top trend line of the wedge structure where Pinterest stock has been trading since May. 

Pinterest stock news: Elliot buys stake at a discount

Elliot Investment Management is a brand name hedge fund. Run by feared vulture investor Paul Singer, the fund runs a multi-strategy approach known for providing investors with industry-leading returns. This means that when Elliot takes a major stake in a beaten down stock, the whole market pays attention. Elliot bought a sizable chunk of Twitter several years ago, so the social media landscape is not new territory.

Pinterest has been the target of a number of acquisition teams. In 2021 both Microsoft, around February, and PayPal, around October, were said to be interested in acquiring the digital scrapbook platform. Before it walked away from the deal due to a near shareholder uprising, PayPal was said to have offered $70 a share. That is about six times the closing share price on Thursday.

With Pinterest stock lagging severely in 2022 – PINS is off 52% YTD and 75% over the past year – the board of directors decided to make majors moves. Founder Ben Silbermann dropped the CEO title a month ago to become executive chairman of the firm, and the board brought in experienced journyman executive Bill Ready. You may have heard of a few of his former employers. His resume includes stints as head of commerce at Google, CEO of Venmo and chief operating officer at PayPal.

Pinterest Stock Forecast: Breaking $21.15 is a requirement

Many a Pinterest stock stan have come and gone in the past year since this social media scion decided to lose the vast majority of its value. That said, Pinterest is awfully cheap now. PINS has been trading for a sub-4 forward price/sales ratio, and its forward enterprise value/EBITDA is below 15. Its forward adjusted PE ratio is below 20. All around I can see why sharks are circling this one. 

PINS stock has been trading inside a wedge structure since May. To break out of the chart pattern, PINS needs to accelerate through $21.15, which is where the descending top trend line is currently waiting. Doing so would like send PINS to the next resistance level at $23.50. Support remains at the ascending bottom trend line near $17.50.

PINS daily chart