Reddit's Share Price on the Rise After Impressive Q1 Results

Reddit Inc, under the ticker RDDT, saw its share prices increase during early trading on Wednesday following the announcement of their impressive first-quarter results.

The financial community has shown excitement over the recent earnings season, with Reddit's performance standing out. Several analysts have provided their insights on the company's outlook.

Expert Opinions on Reddit's Performance

Bank of America Securities analyst Justin Post retained a Neutral rating on Reddit but boosted the price target from $50 to $57. Post highlighted that with revenues hitting $243 million and EBITDA at $10 million, Reddit's Q1 results surpassed expectations. The earnings beat was attributed to a positive macro environment, strong direct response (DR) growth, and fresh data agreements, including some with Google's parent company, Alphabet Inc.

Reddit also impressed with a daily active users (DAUs) count of 9.6 million, breezing past the prediction of 77.3 million. According to Post, the second-quarter guidance provided by Reddit's management indicates a strong user base and advertising business momentum.

Growth Trajectory According to Analysts

Goldman Sachs analyst Eric Sheridan also kept a Neutral rating yet increased the price target from $40 to $55. Sheridan praised Reddit for its robust annual user growth of 37% in DAUs. He attributed this growth to both an influx of new users and improved user engagement. Sheridan suggests that the key factors affecting Reddit’s stock price in the future could be the state of digital advertising, the company’s execution in growing its user base, and its success in expanding advertiser relationships.

Meanwhile, Needham analyst Laura Martin reiterated a Buy rating, raising the target from $55 to $63. Martin cited Reddit's revenue growth, which is accelerating five times faster than costs, pointing towards significant margin expansion and free cash flow (FCF) growth. She expressed confidence in Reddit's business model, highlighting a 39% year-on-year increase in advertising revenues, amounting to $223 million. Reddit’s advancements in artificial intelligence (AI) for content relevance and user engagement also indicate strong potential for an enhanced user experience and operational efficiency, Martin added.

RDDT Price Movement: On Wednesday, Reddit’s shares experienced a 2.43% uptick, trading at $50.60.

Earnings, Growth, Advertising