Reddit CEO Steve Huffman stands on the floor of the New York Stock Exchange (NYSE) after ringing the floor bell setting the stock price at $47 in the initial public offering (IPO) on March 21, 2024 in New York.
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Reddit shares rose over 7% to a record high on Tuesday after analysts at Raymond James raised their price target and reiterated their “strong buy” rating for the social media platform.
The company’s shares hit $191 in midday trading, surpassing a previous high of $182 on January 6. Reddit shares topped $100 for the first time in late October after the company reported financial results for the third quarter which exceeded Wall Street’s expectations.
Analysts at Raymond James said in a note on Tuesday that they would raise their price target on Reddit to $200 from $150, largely because of their “belief” that Reddit can expand its business internationally.
The company plans to attract more users outside its core U.S. market as it looks to expand its advertising business, Reddit Chief Operating Officer Jen Wong told CNBC in November. Reddit’s third quarter sales, which are mostly online advertisinggrew 68% year-over-year to $348.4 million.
Reddit’s increased use of artificial intelligence to automatically translate its website text into languages as diverse as Portuguese, French, Spanish, Filipino and German “should help improve Reddit’s local search rankings and ensure long-term hypergrowth,” Raymond James analysts wrote.
The company’s AI translation efforts are key to its international expansion, Wong told CNBC in November. Reddit’s fastest-growing regions in terms of users include the UK, the Philippines, India and Brazil, she said.
“That points to a big growth opportunity for our future users definitely outside of the US and the local language,” Wong said. “Every language is an opportunity for another Reddit.”
The company also remains one of the five most searched websites, Raymond James analysts said, citing research firm SimilarWeb. Reddit’s “authentic and uniquely moderated content (community system)” will help the company stay at the top of search results, ultimately resulting in more Reddit users creating accounts, the analysts wrote.
Reddit makes more money from logged-in users who have accounts rather than logged-out users, who have been visiting the platform more often over the past year due to internal improvements to the website and a previous change to Google’s search algorithm that favored “authentic” content.
Raymond James analysts noted in a “risks” section that Reddit could suffer from “adverse Google search algo updates” that push place lower in the search results and slower conversion rates of those unsubscribed users into more financially lucrative signed-up users.
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