Needham raises Reddit stock price target to $300 on GenAI benefits

Investing.com - Needham raised its price target on Reddit (NYSE:RDDT) to $300.00 from $215.00 on Monday, while maintaining a Buy rating on the social media platform’s stock. The new target comes as Reddit trades near its 52-week high of $266.64, with the stock showing impressive momentum through a 330% gain over the past year. According to InvestingPro analysis, the stock appears overvalued at current levels.

The research firm cited generative artificial intelligence (GenAI) and rising labor productivity as key factors behind the increased target and revised estimates for fiscal years 2025 and 2026. The company’s strong fundamentals support this outlook, with revenue growing 70% in the last twelve months to $1.67 billion and maintaining impressive gross profit margins of 91%.

Needham identified three specific ways Reddit benefits from GenAI developments, including becoming a key beneficiary as Google’s search engine shifts to providing direct answers instead of links to publishers on the open web.

The firm noted that high-quality publishers are now approaching Reddit to be included in its search results to replace traffic lost from Google, potentially creating new revenue opportunities.

Additional GenAI benefits highlighted include Reddit’s use of automated translations to build international communities faster, and ongoing discussions with OpenAI and Google’s Gemini to renew agreements with more favorable terms for Reddit beyond simple data fees.

In other recent news, Reddit’s strong second-quarter results have prompted several investment firms to adjust their price targets for the company. Deutsche Bank raised its price target to $205, maintaining a Buy rating, following Reddit’s better-than-expected revenue and improved third-quarter guidance. The company’s global daily active users grew by 21% year-over-year, reaching 110.4 million, which exceeded analyst estimates. Morgan Stanley also increased its price target to $230, citing better-than-expected user metrics, particularly in the U.S., where user numbers remained stable despite previous projections of a decline.

Jefferies raised its price target on Reddit to $300, maintaining a Buy rating, due to the sustainability of revenue growth and stabilization in daily active user trends. RBC Capital reiterated its Sector Perform rating with a price target of $210, focusing on Reddit’s ad load analysis and future surface expansion opportunities. BofA Securities increased its price target to $180, highlighting strong execution and the rapid growth in advertiser adoption, which has risen by 50%. These developments reflect a positive outlook from analysts regarding Reddit’s recent performance and future potential.

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