Reddit’s (RDDT) shares aimed for the sky during early trading on Friday after the social media company logged a Q3 earnings blast, drawing in new price target boosts and Buy ratings from Wall Street. Jefferies (JEF) called the performance “scary good growth.”
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Reddit Rises Above Wall Street
RDDT stock backpedaled from a nearly 8% drop from the previous day, rising more than 11% to $216.20 per share on Friday as of 6:37 a.m., as investors began to digest the latest financial results.
In its third-quarter results, the California-based company saw sales jump 68% from the same period last year, hitting $585 million and surpassing analysts’ forecast of $549.12 million. It also recorded total daily active uniques (DAUq) of 116 million, up 19% year-over-year.
Wall Street Rains Praise on Reddit
Reacting to the earnings, Wall Street analysts on Friday showered RDDT stock with price boosts and Buy ratings. According to Jefferies analyst John Colantuoni, who maintained his $300 price target on Reddit — more than 50% upside — the “commanding” performance emphasizes the social media company’s “attractive opportunity” to drive increased advertisers’ spending.
This comes from platform enhancement, the introduction of new products, and designs that make the platform easier to use. Colantuoni believes that while Reddit’s growth matches its peers, this state is not yet reflected in its stock market value.
Similarly, Citizens analyst Andrew Boone, who maintains the same price target as Colantouni, hailed Reddit’s advertising strategy and further emphasized that the social news aggregator remains “increasingly important” to the open web ecosystem as search engines and chatbots rely on its content.
Among other factors, Boone, who is a five-star analyst, sees the addition of Answers — an AI-powered feature that collates and summarizes responses to users’ queries — as Reddit’s default search function to be “a significant” catalyst for next year. Boone also pointed out that the introduction of machine translation across international markets is helping Reddit gain more users.
Is Google a Threat to Reddit?
However, RBC Capital analyst Brad Erickson, who maintained his $245 price target with a Sector Perform (Hold) rating, pointed out that slowing growth in the number of daily active users might amplify the arguments of bearish analysts.
Skeptics have raised concerns about Reddit’s future in the face of Alphabet’s (GOOGL) Google generative AI solutions. As a case study, Erickson pointed to the strong adoption of Google’s new AI Mode, reported in its Q3 results released on Thursday.
Furthermore, the five-star analyst said his team is still awaiting clarity on whether Reddit will renew its AI deal with Google and resolve wider industry concerns related to this partnership.
Is Reddit a Strong Buy?
While analysts have started to reassess their ratings and price targets on Reddit’s stock, they are still early into this process. However, based on 24 ratings over the past three months, Reddit’s shares currently have a Moderate Buy consensus recommendation. This breaks down to 16 Buys and eight Holds issued by analysts.
Moreover, the average RDDT price target of $237.87 indicates more than 22% upside potential from the current level.
