Reddit Earnings Loom As Stock (RDDT) Makes A Move Higher – What To Expect

Reddit heads into this evening's earnings report with a stock that is currently stuck below what has been a pretty firm resistance level at $160. Today's price action indicates there may be some optimism on the street, with Reddit's stock price having added 5.4% in the first few hours of trading.

Despite what has been a solid turnaround off April's low, RDDT remains down 20% in the past 6 months, raising a few questions after what had been some breakneck appreciation.

For the quarter, Reddit has provided revenue guidance of $410 million to $430 million and adjusted EBITDA of $110 million to $130 million. Average expectations from analysts leading in are for a revenue figure of $425.97 million, for an impressive 51.5% annualised sales growth.

EPS is expected to come in at $0.19 on the period, a huge upside on the $0.06 loss in the same period last year, and a sequential improvement on the $0.13 profit in the most recent quarter (Q1).

In that Q1 report, Reddit reported a 61% surge in revenue, reaching $392.4 million also exceeding expectations, whilst daily active unique visitors also increased significantly, rising 31% to 108.1 million.

Analysts have weighed in on Reddit's prospects leading into earnings.

Roth Capital anticipates potential upside to the high end of the company's guidance but cautions about its reliance on Google and the growing threat from AI-driven search. According to their research note, Reddit's dependence on Google for traffic and the increasing use of AI search tools could pose challenges.

Wells Fargo believes that the financial results should align with or surpass expectations. Their focus remains on the health of search referral traffic and the continued growth of logged-in daily active unique users, which they view as crucial for the stock's long-term success.

Bank of America (BofA) has modestly increased its estimates for the quarter, citing improved advertising demand since April. However, they maintain a Neutral rating due to tougher revenue comparisons expected in the second half of the year and data indicating a potential slowdown in user growth.

Raymond James is notably bullish, raising their price target from $150 to $175 and reiterating a Strong Buy rating. They anticipate a positive setup heading into the earnings report, expecting daily active users to exceed consensus estimates. They also foresee management offering early commentary on the potential tailwinds from AI search.

Citi are optimistic, pointing to the launch of new ad products and growing advertiser interest as key drivers, whilst Morgan Stanley has increased estimates across the internet sector, citing a more favorable macroeconomic backdrop and lower China tariffs. .

TD Cowen reports a 20% year-over-year decline in TikTok advertising spend in Q2, with advertisers shifting budgets to platforms like Reddit. This could provide a significant boost to Reddit's advertising revenue if it shows in the quarter.

The market awaits to see if Reddit can continue its upward trajectory of growth or if potential headwinds will temper investor enthusiasm. The company's performance in Q2 and its outlook for the remainder of the year will be key determinants of its stock's future.