8-5-2024 (LONDON) Reddit witnessed a remarkable surge of up to 11 per cent in early trading on Wednesday (May 8) following the social media company’s impressive display of robust revenue growth and enhanced profitability in its maiden earnings report since going public.
In a surprising move late on Tuesday, the firm unveiled a forecast indicating the potential for posting an adjusted profit in the second quarter, coupled with a revenue outlook that surpassed analysts’ expectations.
The optimistic projections stem from Reddit’s outperformance in the first quarter of 2024, highlighting the success of its initiatives to expand its advertising business and secure content licensing agreements with AI-focused entities such as Google.
Bernstein analyst Mark Shmulik expressed his astonishment at Reddit’s stellar performance, stating, “We suspected that Reddit would come out strong out of the gates, and Reddit exceeded our bullish expectations.” He attributed the success to the robust digital advertising market and increased traffic, facilitated by strategic partnerships, notably with Google.
Analysts have emphasised that despite Reddit’s establishment in 2005, the platform is still in the nascent stages of monetising its user base through advertising. They anticipate further growth in the upcoming quarters, driven by expanded ad targeting tools and enhanced measurement capabilities.
With over 100,000 discussion forums, known as subreddits, covering a wide array of user-generated content topics, Reddit has emerged as an attractive destination for companies seeking to leverage its vast dataset for training AI models.
According to LSEG data, at least 7 analysts have revised their price targets for Reddit’s stock, elevating the median view to US$55. This surge comes after the company priced its eagerly anticipated initial public offering at US$34 in March.
Piper Sandler analysts remarked that Reddit is still in the early phases of developing its advertising business, highlighting significant untapped potential in international markets.
