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On Friday, JPMorgan raised the price target on Reddit (NYSE:RDDT) shares from $110.00 to $145.00, while maintaining a Neutral rating on the company. Currently trading at $118.79, InvestingPro analysis suggests the stock is slightly overvalued, despite showing a strong financial health score. The adjustment followed Reddit’s strong performance in the first quarter and positive guidance for the second quarter, which indicated robust growth across various aspects of the business.
The company reported significant growth in both revenue and user engagement, with a notable increase in daily active users internationally, driven by machine translation improvements. Reddit’s advertising business also appeared resilient against macroeconomic pressures, with second-quarter growth projections ranging between 46% and 53%. This reflects sustained momentum across different verticals, geographic regions, and channels.
Reddit’s ad revenue growth accelerated to 61% year-over-year in the first quarter, contributing to substantial profit gains. According to InvestingPro data, the company maintains impressive gross profit margins of 90.49% and holds more cash than debt on its balance sheet. The platform’s revenue growth outpaced non-GAAP expenses by approximately 3.2 times during the same period. Subscribers to InvestingPro can access 10+ additional key insights about Reddit’s financial health and growth prospects. Despite this, the company anticipates near-term traffic volatility, mainly affecting U.S. logged-out users, due to changes in the Google (NASDAQ:GOOGL) search ecosystem. In April, daily active user growth decelerated to a high-teens percentage range.
The analyst from JPMorgan highlighted Reddit’s continued execution and ability to capture a larger share of advertiser budgets. The platform is expected to advance in its full-funnel diversification strategy, driving both strong revenue growth and improved profitability. However, the long-term risks associated with the lack of visibility into the effects of Google search ecosystem changes were also noted.
JPMorgan’s updated estimates reflect a more optimistic outlook following a revision in early April due to recession concerns. With a current market capitalization of $21.49 billion, the firm now projects an average revenue growth of 12% for 2025 and 2026, with adjusted EBITDA and free cash flow (FCF) expected to increase by 33% and 34%, respectively. These projections support Reddit’s premium valuation, with the December 2025 price target of $145 based on approximately 35 times the estimated 2026 adjusted EBITDA of $807 million. For detailed valuation metrics and comprehensive analysis, check out the Reddit Pro Research Report, available exclusively on InvestingPro.
In other recent news, Reddit reported impressive first-quarter 2025 earnings, with revenue reaching $392 million, a 61% increase year-over-year, and an earnings per share (EPS) of $0.13, significantly surpassing the forecasted $0.01. This strong financial performance is attributed to robust advertising revenue growth and a notable rise in daily active users. Citi analysts responded by raising their price target for Reddit to $158, maintaining a Buy rating due to the platform’s acceleration in ad revenue growth and increased user engagement. Similarly, Goldman Sachs adjusted its price target to $140, highlighting Reddit’s solid revenue growth and strategic developments in AI and advertising performance.
Bernstein SocGen Group also upgraded Reddit’s stock rating from Underperform to Market Perform, increasing the price target to $130, recognizing Reddit’s solid management and ability to navigate market challenges. The company’s first-quarter success is further supported by a 70% operating leverage and a 29% EBITDA margin, indicating efficient cost management and strong profitability. Reddit’s management is optimistic about future growth, projecting second-quarter revenue between $410 million and $430 million, with an expected Adjusted EBITDA of $110 million to $130 million.
Reddit’s strategic initiatives, such as the broader rollout of Reddit Answers and the anticipated launch of Direct Purchase Ads, are seen as potential catalysts for continued growth in both user base and revenue. Despite some concerns about potential impacts from changes in Google’s algorithm, analysts like those at Citi believe Reddit’s revenue growth will remain unaffected, with engagement levels continuing to rise. These developments underscore Reddit’s position as a growing force in the digital advertising and social media landscape.
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