Reddit stock price target cut to $225 at Jefferies

On Thursday, Jefferies analyst John Colantuoni adjusted the price target for Reddit (NYSE:RDDT) shares, bringing it down to $225 from the previous $230, with the stock currently trading at $216.47 and commanding a market capitalization of $38 billion. Despite this reduction, the firm maintains a Buy rating on the company’s stock. Colantuoni highlighted Reddit’s continued success in diversifying its customer base and product offerings, which has led to a fifth consecutive acceleration in advertising revenue.

The analyst acknowledged the company’s impressive results and forward-looking guidance, including remarkable revenue growth of 48.7% and an industry-leading gross profit margin of 89.25%, but noted that these were somewhat eclipsed by an unexpected slowdown in U.S. user growth. Colantuoni remains optimistic about Reddit’s future, citing the platform’s early-stage monetization potential as a key factor that could sustain its attractive growth trajectory through 2025 and 2026. InvestingPro analysis reveals 15+ additional key insights about Reddit’s financial health and growth prospects.

Colantuoni’s stance is supported by his decision to largely maintain revenue estimates for Reddit, pending further details on year-to-date user trends. He emphasized the strength of the company’s performance in advertising revenue, suggesting that this aspect of the business could continue to drive financial success.

The maintained Buy rating indicates Jefferies’ confidence in Reddit’s strategic initiatives and potential for continued revenue growth, despite the recent concerns regarding user expansion in the U.S. market. Reddit’s efforts to broaden its revenue streams and enhance its product offerings appear to align with Jefferies’ positive outlook on the company’s stock.

In other recent news, Reddit’s earnings report revealed that the company surpassed revenue expectations by approximately 5%, with EBITDA significantly higher at $154 million, compared to the Street’s forecast of $128 million. Raymond (NSE:RYMD) James maintained its Strong Buy rating and $250 price target for Reddit, despite a slight miss in U.S. daily active users due to changes in Google (NASDAQ:GOOGL)’s algorithm. Analysts at Citi and JMP Securities also expressed optimism about Reddit’s financial health, raising their price targets to $220 and $200 respectively, citing a robust increase in advertising revenue and strong financials as key strengths.

Goldman Sachs lifted its price target for Reddit to $185, noting the company’s revenue momentum and positive trend in incremental Adjusted EBITDA margins. Meanwhile, Guggenheim reiterated its Buy rating and $210 price target, highlighting Reddit’s potential for global user growth and substantial revenue growth in the upcoming year.

These are recent developments in the company’s performance and strategic initiatives, which have reinforced analysts’ confidence in Reddit’s potential for growth. Reddit’s management remains optimistic about the potential for global daily active user growth and is investing in advertising infrastructure, utilizing machine learning and automation, and exploring a comprehensive end-to-end platform. These efforts are expected to position Reddit for substantial revenue growth in the foreseeable future.

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