Shares of Reddit (RDDT) were on an upswing in Wednesday’s trading after top-rated Jefferies analyst John Colantuoni initiated coverage on the stock with a Buy rating. Let us look at the analyst’s rationale behind the bullish stance on the social media platform company.
Colantuoni’s Rationale Behind the Buy Rating
The analyst expects that Reddit’s EBITDA will more than double over the next two years, reaching around $450 million. This growth is expected to be fueled by “peer-high” expansion in the user base and the company’s growing potential to close the monetization gap with its competitors.
Additionally, Colantuoni anticipates that Reddit will secure more high-margin data licensing deals. This could be profitable for the company as the expanding applications for generative AI continue to increase the value of Reddit’s vast database of contextual content.
Colantuoni has a price target of $90 on the stock, implying an upside potential of 27.2% from current levels.
Meanwhile, Reddit is expected to announce its Q3 results on October 29.
What Is the Future of RDDT Stock?
Analysts remain cautiously optimistic about RDDT stock, with a Moderate Buy consensus rating based on nine Buys and six Holds. Over the past five trading sessions, RDDT has increased by 3.8%, and the average RDDT price target of $71.33 implies a downside potential of 2.8% from current levels.
