B.Riley has increased its price target on Reddit (NYSE: RDDT) shares to $87, up from the previous target of $75, while maintaining a Buy rating on the stock.
The firm anticipates Reddit to deliver robust third-quarter earnings, which are scheduled to be announced on October 29, after the market closes.
The revision in the price target reflects an optimistic outlook for the social media platform's financial performance. Analysts expect Reddit's top-line growth to be largely fueled by a continued surge in daily active users (DAUs) and a rise in licensing revenue. Operational expenditure (opex) leverage is also projected to contribute to swifter growth in EBITDA and the expansion of profit margins.
The company's management commentary on platform enhancements, user growth and engagement, monetization strategies, and the content licensing deals pipeline are considered crucial factors that will influence Reddit's stock in the short term. These elements are expected to provide insight into the company's ongoing performance and future prospects.
In other recent news, Reddit has seen a surge in Q2 revenue by 54%, reaching $281.2 million, surpassing analyst expectations of $253.6 million. The company's net loss decreased substantially to $10.1 million from $41.1 million a year ago, and the adjusted EBITDA turned positive at $39.5 million.
Deutsche Bank has increased Reddit's price target to $85 from $73, citing strong fundamentals and positive digital advertising sentiment. Jefferies also initiated coverage on Reddit, projecting a doubling of the company's EBITDA in the next two years, driven primarily by user growth.
The firm has set a price target of $90.00 for Reddit's stock, reflecting confidence in the company's revenue diversification and potential to capitalize on its unique data assets. Reddit's recent announcement to expand its AI-powered machine translation services to 35 additional countries has been well received by several firms. Deutsche Bank, JMP Securities, and B.Riley have reiterated their Buy ratings on Reddit shares, influenced by this development.
InvestingPro Insights
Recent data from InvestingPro aligns with B.Riley's optimistic outlook on Reddit (NYSE: RDDT). The company's revenue growth has been impressive, with a 53.63% increase in the most recent quarter. This robust growth supports B.Riley's expectation of strong third-quarter earnings.
InvestingPro Tips highlight that Reddit holds more cash than debt on its balance sheet and that liquid assets exceed short-term obligations. These factors contribute to the company's financial stability as it pursues growth strategies. Additionally, analysts anticipate sales growth in the current year, which corroborates B.Riley's projection of top-line growth driven by increased daily active users and licensing revenue.
The stock's recent performance has been noteworthy, with InvestingPro data showing a significant 97.9% price return over the last six months. This aligns with the market's positive sentiment reflected in B.Riley's upgraded price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Reddit, providing deeper insights into the company's financial health and market position.
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