Reddit (RDDT) stock jumped 2.4% in after-hours trading yesterday on the addition of Meta Platform’s (META) Ad import feature. Piper Sandler analyst Thomas Champion was the first to notice and report on the new feature, calling it a potential catalyst to attract more advertisers to Reddit’s platform.
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Interestingly, Reddit shares also gained 7.7% in regular trading on January 28, following a price target hike from JMP Securities. Five-star analyst Andrew Boone maintained a Buy rating and lifted the price target on RDDT stock to $190 from $160. Ahead of Reddit’s Q4 results, Boone remains highly optimistic about its future performance, driven by improved ad relevance, a more competitive auction environment for advertisers, and improved search capabilities.
Champion’s View on Reddit’s Ads Import Strategy
Reddit is testing a beta version of a new feature that streamlines imports of ad campaigns from Meta’s Ads Manager. Champion is highly optimistic about this move since it simplifies marketers’ pivot towards Reddit’s ads manager. Following his observation, Champion mentioned in a research note that the Reddit Ads Manager strategy can help accelerate the onboarding of the over 10 million advertisers that spend on Meta’s ads platform.
Reddit’s strategy could enhance its competitive position in the digital advertising space, Champion added. Meta already holds a dominating position in the market and by leveraging the social media giant’s ads platform, Reddit is on track to make its platform easily accessible to advertisers. This could potentially bolster Reddit’s advertising revenues going forward.
The analyst also believes that this could be one of the hot topics of discussion on Reddit’s upcoming Q4 FY24 earnings call, scheduled for February 12. Ahead of Reddit’s results, Champion reiterated a Buy rating and $197 price target (1.2% upside potential) on RDDT stock. The Street expects Reddit to report diluted earnings per share (EPS) of $0.24 on revenues of $404.17 million, according to TipRanks Financial Forecasts.
Insights from TipRanks’ Bulls Say, Bears Say Tool
Analysts have differing views on Reddit’s performance. According to TipRanks’ Bulls Say, Bears Say tool, some bulls are encouraged by Reddit’s efforts to improve its advertising revenue growth, artificial intelligence-backed support for Reddit’s content, and untapped monetization opportunities such as video ads.
On the other hand, bears are concerned about challenges to Reddit’s user growth amid heated competition, slowing revenue growth, and premium valuation of the stock.
What Is the Future of Reddit Stock?
Analysts remain divided on Reddit’s stock trajectory owing to the points discussed above. On TipRanks, RDDT stock has a Moderate Buy consensus rating based on 11 Buys, five Holds, and one Sell rating. Also, the average Reddit Class A price target of $180.76 implies 7.2% downside potential from current levels. Meanwhile, in the past year, RDDT shares have zoomed over 323%.
