Street Calls of the Week
On Monday, Seaport Global Securities analyst Aaron Kessler upgraded Reddit stock, trading on the New York Stock Exchange under the ticker (NYSE:RDDT), from Neutral to Buy. Accompanying this upgrade, Kessler also set a new price target of $165.00, based on 14 times the company’s expected 2026 enterprise value to revenue. According to InvestingPro data, the stock currently trades at $113.83, with analyst targets ranging from $75 to $220, reflecting diverse market opinions about this $21 billion market cap company.
The upgrade follows Reddit’s announcement of robust first-quarter revenue growth, which surged 61.5% year-over-year, and strong EBITDA performance. InvestingPro data shows even more impressive metrics, with trailing twelve-month revenue growth at 64.12% and an exceptional gross profit margin of 90.82%. Additionally, the company provided guidance that suggests continued revenue and EBITDA strength in the second quarter. However, Reddit’s stock had experienced a sell-off due to slowing user growth in the second quarter, particularly in the U.S., which Kessler attributes to recent changes in Google (NASDAQ:GOOGL) search algorithms. For deeper insights into Reddit’s financial health and growth prospects, investors can access comprehensive analysis through InvestingPro’s detailed research reports, available for over 1,400 US stocks.
Despite the near-term challenges, Seaport Global Securities maintains a positive outlook on Reddit’s long-term growth potential. Kessler highlights the platform’s position as one of the largest user destinations on the internet and anticipates sustained momentum in user growth, especially internationally. The analyst also notes Reddit’s appeal to advertisers and the significant opportunities for revenue and monetization growth in both U.S. and international markets. This optimism is supported by Reddit’s strong financial health score of 2.84 (rated as GOOD) on InvestingPro, though current valuations suggest the stock is slightly above its Fair Value.
Kessler’s analysis projects a long-term revenue growth rate exceeding 20% and EBITDA margins surpassing 50%. He considers the current valuation, approximately 10 times the expected 2026 enterprise value to revenue, to be attractive and encourages buying on the recent pullback.
In summary, Seaport Global Securities’ upgraded rating and new price target reflect confidence in Reddit’s financial health and potential for continued growth in the user base and revenue, despite short-term headwinds affecting user expansion in the U.S. market.
In other recent news, Reddit has reported strong financial performance, exceeding expectations with a notable revenue surge of 61% year-over-year in advertising revenue. The company’s first-quarter results included a revenue increase that surpassed optimistic forecasts by $22 million, with guidance for a 49% year-over-year revenue growth for the second quarter of 2025. Analysts have responded positively to these developments. Citizens JMP raised Reddit’s stock price target to $180, highlighting the company’s advertising platform improvements and potential for international expansion. JPMorgan also adjusted its price target to $145, noting robust growth across various business aspects and Reddit’s resilience against macroeconomic pressures. Goldman Sachs increased its price target to $140, citing strong revenue growth and operating leverage, while Citi lifted its target to $158, emphasizing the platform’s increased user engagement and new features like Reddit Answers. Bernstein upgraded Reddit’s stock rating to Market Perform, raising the price target to $130, acknowledging Reddit’s solid management and strategic execution in a volatile market. These recent developments reflect a broad consensus among analysts about Reddit’s promising growth trajectory and strategic focus.
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