Reddit (RDDT) shares surged nearly 21% on Friday, fueled by a stellar Q2 earnings report and bullish guidance. This followed a wave of bullish analysts upgrading their price targets, which suggests the stock has much further to climb.
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Reddit’s Q2 Earnings Snapshot
The company reported $500 million in Q2 revenue, a 78% year-over-year increase that blew past Wall Street’s $425 million forecast. Further, it posted earnings of $0.45 per share, far above analysts’ estimates of $0.19.
Also, Reddit’s advertising revenue soared 84% to $465 million, thanks to deeper engagement with existing clients and a 50% rise in active advertisers.
Reddit’s AI-powered “Answers” search tool saw a sixfold increase in weekly users. Meanwhile, daily active users grew 21% to 110 million, reflecting RDDT’s growing influence in both the social media and search spaces.
Analysts Are All In
Following the earnings release, about 13 analysts raised their price targets on RDDT stock, with the majority maintaining a Buy rating.
Among the bullish analysts, Truist Financial analyst Youssef Squali raised the price target to $225 from $160. He noted that RDDT’s Q2 beat was driven by a healthy digital ad market. Further, he added that Reddit is showing strength across channels and campaign objectives.
Similarly, Morgan Stanley’s Brian Nowak boosted his target to $230 from $170. He pointed to improvements in ad onboarding, new ad formats, and a scaling sales force, calling Reddit’s growth runway “long.” The firm also raised its FY25 and FY26 revenue estimates by 12% and 22%, respectively.
Also, Thomas Champion from Piper Sandler lifted his target on Reddit stock to $210 from $150. The analyst called management’s execution “phenomenal.” He expects friction with Alphabet’s (GOOGL) Google over daily active users (DAU) metrics to ease over time.
Is RDDT Stock a Good Buy?
Turning to Wall Street, RDDT stock has a Moderate Buy consensus rating based on 14 Buys, eight Holds, and one Sell assigned in the last three months. At $185.68, the average Reddit stock price target implies a 4.45% downside potential.
It must be noted that several analysts are yet to revise their price targets following the recent surge.
