Reddit’s Stock (RDDT) Jumps On Blowout Earnings – Analysts Raise En Masse

Reddit's stock (RDDT) is surging higher after the social media platform delivered a stunning beat and raise earnings report, prompting a wave of bullish revisions from Wall Street analysts. RDDT is currently trading at $184, up 14.5% on the day, although there is plenty of volatility in price, swinging currently between $180 and $190.

The company's performance was supported by accelerating advertising revenue and strong user growth, reigniting enthusiasm on the street.

Q2 results exceeded expectations by quite some way, with revenue soaring 78% year-over-year to $500 million, outpacing even the most bullish end of the company’s guidance by a significant $70 million.

An 84% surge in advertising revenue was the biggest win, whilst DAUs rose 21% to 110.4 million.

Wall Street's Bullish Response

The impressive results led to a flurry of price target increases from analysts.

B. Riley led the charge, raising its target to $235 from $220, reiterating a Buy rating. Their analysis highlighted Reddit's “solid Q2 results” and “strong business momentum,” emphasizing that the company is still in the early stages of both revenue growth and margin expansion.

Citizens JMP also boosted its price target substantially, moving to $225 from $180 and maintaining an Outperform rating. The firm described Reddit's quarter as an “outstanding beat-and-raise,” underscoring the magnitude of the revenue and EBITDA outperformance. While acknowledging that the “hyper” growth seen in 2024 might be behind the company, the firm believes Reddit has a significant opportunity to expand its user base further.

Morgan Stanley analyst Brian Nowak raised his firm’s price target to $230 from $170, keeping an Overweight rating. Nowak cited improvements in ad onboarding, new ad formats, and a scaling salesforce as key drivers for future growth, leading to increased FY25 and FY26 revenue estimates by 12% and 22%, respectively.

Other notable price target increases came from Guggenheim (to $215 from $165, Buy rating), Loop Capital (to $225 from $200, Buy rating), Piper Sandler (to $210 from $150, Overweight rating), Oppenheimer (to $215 from $160, Outperform rating), and Raymond James (to $225 from $175, Strong Buy rating).

Not all analysts are uniformly bullish. Whilst Bank of America (BofA) raised its price target to $180 from $150, it maintained a Neutral rating on the stock. While acknowledging the “solid” Q2 beat and raising revenue and EBITDA forecasts for 2025 and 2026 by 10%/15% and 19%/25% respectively, BofA believes that “a lot” is already priced into the stock at current levels.

JPMorgan also maintained a Neutral rating, raising its price target to $190 from $145, with Baird offering a similar perspective, raising its target to $177 from $151 while keeping a Neutral rating, citing continued execution but suggesting limited further upside.

Loop Capital's analysis highlighted a key driver of Reddit's growth: ad monetization.

They noted that growth is “almost totally driven by ad monetization which increased 69% per domestic DAU.” They see “tremendous runway” for continued growth as Reddit rolls out new ad tools, translates its content to more global markets, grows its user base, and becomes a critical source for AI learning models. This last point is particularly significant, as Reddit's vast trove of user-generated content positions it as a valuable resource for training large language models.

Piper Sandler expects the “Google/DAU friction” to moderate over time. This likely refers to the impact of Google's search algorithm changes on Reddit's traffic, suggesting that the firm believes Reddit can mitigate any negative effects through its own initiatives and content strategies.

Oppenheimer pointed to management's ability to leverage marketing to maintain daily average user growth, offsetting organic search volatility. This underscores the importance of Reddit's marketing efforts in driving user acquisition and engagement.

In summary, Reddit's Q2 earnings were a resounding success, driving a surge in analyst optimism and sending the stock higher. While valuation remains a concern, the company's strong growth prospects, advertising revenue, user engagement, and its strategic position in the AI landscape, leave bulls with plenty to cling to.