BofA lifts Reddit stock price target to $190, maintains neutral

On Thursday, BofA Securities analyst Justin Post adjusted the price target for Reddit stock, trading on the New York Stock Exchange under the ticker (NYSE:RDDT), to $190 from the previous target of $180. The firm upheld a Neutral rating on the shares, signaling a cautious stance despite acknowledging the company’s robust performance relative to the industry. The stock, which has delivered an impressive 329% return over the past year according to InvestingPro data, currently trades near its 52-week high of $230.41.

Post remarked on Reddit’s strong results compared to its peers, citing the platform’s effective sales and cost management strategies. The platform maintains an exceptional gross profit margin of 89.25% and achieved revenue growth of 48.7% in the last twelve months. The growth prospects for Reddit appear promising, especially with the potential of AI to enhance content on the site, the increasing number of international users, underutilized assets, and the possibility of raising advertising prices. InvestingPro subscribers can access 14 additional key insights about Reddit’s growth potential.

Despite the positive outlook, Post noted that Reddit’s fourth-quarter revenues were only $28 million above the high end of its guidance, a smaller margin than past performances since its initial public offering. Additionally, the unexpected shortfall in U.S. user growth was highlighted as a less favorable aspect of the report.

The analyst’s appraisal of Reddit’s growth trajectory was tempered by several factors. Firstly, the stock’s premium valuation seems to already reflect anticipated growth and margin benefits, trading at around $188 in after-hours, which is approximately 15 times BofA’s revised 2026 revenue projections compared to competitors at 5 times. Secondly, there is an expectation of a revenue growth slowdown in the second half of the year. Lastly, Reddit’s reliance on Google (NASDAQ:GOOGL) could pose a risk, as the search engine may increasingly prioritize AI-generated answers, potentially affecting Reddit’s user traffic and engagement.

In other recent news, Reddit has been the subject of various analyst reports. Bernstein SocGen Group maintained its Underperform rating on Reddit shares, with a consistent price target of $150. The firm’s analysis highlighted a new issue with user engagement which influenced this decision. In contrast, JPMorgan analyst Doug Anmuth increased the price target on Reddit shares to $185 while maintaining a Neutral rating. Reddit’s ad revenue growth accelerated to 60% year-over-year in the fourth quarter, contributing to a significant increase in adjusted EBITDA margins.

Jefferies analyst John Colantuoni adjusted the price target for Reddit shares to $225 from the previous $230, maintaining a Buy rating. The firm has confidence in Reddit’s strategic initiatives and potential for continued revenue growth. Raymond (NSE:RYMD) James reaffirmed its Strong Buy rating and $250.00 price target for Reddit, highlighting improvements in Reddit content indexing by Google and advancements in advertising offerings. Reddit’s revenue outperformed expectations by approximately 5%, while EBITDA was significantly higher at $154 million compared to the Street’s forecast of $128 million.

Finally, Citi analyst Ronald Josey increased the price target for Reddit shares to $220, reiterating a Buy rating. Josey pointed to a robust increase in advertising revenue and expanding margins as reasons for optimism about Reddit’s financial health. These recent developments indicate a diverse range of analyst opinions and projections for Reddit’s future performance.

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