US stock futures flounder amid tech weakness, Fed caution
On Thursday, Piper Sandler adjusted its outlook on Reddit (NYSE: RDDT) shares, reducing the price target from $220.00 to $140.00, while still holding an Overweight rating on the stock. Currently trading at $110.86 with a market capitalization of $20.06 billion, Reddit has shown impressive financial metrics according to InvestingPro data. The adjustment follows Piper Sandler's analysis of the company's expected first-quarter performance, particularly focusing on the Daily Active Users (DAUs) after the Google (NASDAQ:GOOGL) Core update in December.
Piper Sandler projects a total of 108 million DAUs for the first quarter, which is an increase of 6.5 million users from the previous quarter, split between 50.5 million in the United States and 57.7 million internationally. The firm anticipates Reddit's first-quarter revenue to be at the higher end of the $360-370 million range, specifically forecasting $369 million, and expects EBITDA to be near the top of the $80-90 million range, estimating $89.8 million. This growth trajectory aligns with Reddit's impressive 61.71% revenue growth over the last twelve months and its remarkable 90.49% gross profit margin.
The firm has also revised its revenue forecasts for Reddit for the years 2025 and 2026, reducing them by 4% and 7%, respectively. This downward revision in revenue projections is a contributing factor to the decrease in the price target for Reddit shares.
In terms of advertising, Piper Sandler's ad buyer has not observed any significant increase in impression growth on Reddit's platform. There is concern that advertising spend on what is considered a newer or experimental channel like Reddit could decelerate if the macroeconomic environment deteriorates. Additionally, the ad buyer noted that Reddit's tracking pixel, a tool used for measuring ad performance, has not performed as well as those of its competitors.
Piper Sandler's assessment reflects a cautious stance on Reddit's advertising growth potential amid a possibly challenging economic landscape. Despite the lowered price target, the Overweight rating suggests that the firm still sees a positive long-term outlook for Reddit's stock. InvestingPro analysis indicates Reddit is currently trading near its Fair Value, with 14 additional ProTips available to subscribers. For deeper insights into Reddit's financial health and growth prospects, including detailed valuation metrics and peer comparison, check out the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Needham analysts have maintained their Buy rating and $220 price target for Reddit, emphasizing the company's potential for profitability and revenue growth. The firm noted Reddit's ambitious goals, including reaching 1 billion daily active users, and highlighted the company's strategies in search revenue, video content, and international expansion as positive factors. Meanwhile, Guggenheim Securities adjusted Reddit's price target from $210 to $170, though it maintained a Buy rating, reflecting confidence in Reddit's growth prospects, particularly in advertising revenue and user expansion. On the other hand, Baird analyst Colin Sebastian reduced Reddit's price target to $125, citing a more conservative outlook on the company's new product initiatives and market susceptibility. Citizens JMP also revised Reddit's price target, lowering it to $155 while retaining a Market Outperform rating, attributing the change to adjusted EBITDA projections for 2026. These recent developments indicate varying levels of optimism from analysts regarding Reddit's future performance and growth strategies.
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