Can Reddit's Solid Momentum Continue? Analysts Say Social Media Company With 'Robust Business Model' Has 'Continued Strong User Growth'

Zinger Key Points
  • Reddit reported Q1 revenues and EBITDA of $243mn and $10mn, surpassing expectations of $212mn and $24mn, one analyst said.
  • The company exhibited continued strong user growth, with 37% Y/Y growth in total DAUqs, another analyst added.

Reddit Inc RDDT shares were climbing in early trading on Wednesday, after the company reported strong first-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

BofA Securities On Reddit

Analyst Justin Post reaffirmed a Neutral rating while lifting the price target from $50 to $57.

Reddit's first-quarter results reflected strong execution, with revenues and EBITDA of $243 million and $10 million, beating Street expectations of $212 million and $24 million, respectively, Post said in a note.

He added that the beat was driven by "favorable macro, strong DR growth & new data deals," which included some smaller data deals in addition to Alphabet Inc GOOG GOOGL.

Reddit recorded 9.6 million daily active uniques (DAUqs) during the quarter, higher than Street's 77.3 million expectation, the analyst stated. Management's guidance for the second quarter also came in higher than anticipated and suggests "solid momentum in user growth & ad business," he further wrote.

Check out other analyst stock ratings.

Goldman Sachs On Reddit

Analyst Eric Sheridan maintained a Neutral rating while raising the price target from $40 to $55.

Reddit reported continued strong user growth, with 37% year-on-year growth in total DAUs, with strength in the U.S. and across international markets, Sheridan said. This growth was driven by "both top of funnel user growth and strong engagement/conversion trends," he added.

The health of the digital advertising landscape, Reddit's execution of DAUqs and its "sustained momentum around advertiser count growth and advertiser budget" could be the main drivers of stock price volatility in the upcoming quarters, the analyst stated.

Needham On Reddit

Analyst Laura Martin reiterated a Buy rating, while lifting the price target from $55 to $63.

Reddit generated revenue growth 5X faster than cost growth, "driving strong margin expansion and FCF growth," Martin said. "We believe this is indicative of RDDT’s robust business model," she added.

The company's advertising revenues grew by 39% year-on-year to $223 million, "driven by click volumes and a 40% improvement in click-through rates," the analyst wrote.

"RDDT is making investments in AI to enhance their user engagement, moderation, and the relevance of content with a goal of improving the user experience and operational efficiency," she further stated.

RDDT Price Action: Shares of Reddit rose by 2.43% to $50.60 at the time of publication on Wednesday.

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Posted In: Analyst ColorEarningsEarnings MissesSocial MediaPrice TargetReiterationAnalyst RatingsMoversTrading IdeasBofA SecuritiesEric SheridanGoldman SachsJustin PostLaura MartinNeedhamStories That Matter
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