Pinterest (PINS) faces more challenges scaling and diversifying its advertiser base across a wider range of advertisers, Morgan Stanley said.

The company has overhauled its ad management leadership and is focusing more on its small and mid-market advertisers to improve the durability of ad revenue. Ad revenue growth is expected to modestly accelerate in H2, the investment firm said in a Tuesday research report.

The brokerage said it lowered its 2026 and 2027 adjusted EBITDA guidance by 9% and 13%, respectively.

The company's discounted valuation relative to peers does not fully give it credit for implementing its new SMB advertising go-to-market strategy, according to the note.

The brokerage reiterated its outperform rating on the stock and adjusted its price target to $27 per share from $35.

Shares of Pinterest were up more than 2% in Wednesday trading.

Price: 18.79, Change: +0.40, Percent Change: +2.15