Here’s what Wall Street is saying about Reddit ahead of Q1 earnings

Reddit (RDDT) is scheduled to report results of its fiscal first quarter after the market close on April 30, with a conference call scheduled for 4:30 pm ET. What to watch for:

GUIDANCE: In February, Reddit posted much better than expected results for its fourth quarter and guided Q1 revenue of $595M-$605M and adjusted EBITDA of $210M-$220M. Analysts currently expected revenue of $607.78M on earnings per share of 56c.  

STRUCTURALLY HIGHER MARGINS: Rothschild & Co Redburn lowered the firm’s price target on Reddit to $110 from $125 and keeps a Sell rating on the shares ahead of the earnings report. The firm believes Reddit’s business will continue to have structurally higher margins than peers. However, it views buy-side estimates as challenging, making upside unlikely given that the stock “still commands a premium multiple.”

‘INCREDIBLY UNDER-MONETIZED’: DA Davidson initiated coverage of Reddit with a Buy rating and $200 price target citing a belief that Reddit remains “incredibly under-monetized relative to peers.” The “human-first social platform” should continue to attract more users and advertisers as it scales, which should support more favorable contract renewals with the leading LLMs, a broader base of advertisers, and further operating leverage, the analyst tells investors.

Given the discretionary nature of online advertising spend, higher expected Reddit growth rates and a premium valuation to peers, BofA said it sees Reddit as one of the most macro sensitive stocks in its coverage group, the analyst added.

‘COMPELLING’ VALUATION: Truist said Reddit is the fastest growing ad platform and one of the most profitable within the firm’s coverage universe while also serving as the most highly sourced reference for ChatGPT and Gemini, and with the stock down 40% year-to-date, its valuation is compelling. Truist further notes it is positive on Reddit’s pace of user growth and engagement post Google’s (GOOGL) latest algorithm changes in March, and the potential for AI disintermediation.

SLOWING U.S. TRENDS: JPMorgan said Reddit shares have been pressured by softer third-party user data, the broader social media trial, and possibly early concerns on potential geopolitical headwinds to digital advertising budgets. SimilarWeb data suggest Reddit’s U.S. unique visitor growth year-over-year has decelerated to up 1% in March from up 5% in February, the analyst said. JPMorgan adds that while third-party data suggests softer recent trends closing out the quarter, investors are already expecting 1M quarter-over-quarter U.S. daily active user net additions and 5M globally in Q1.