A few positive moves by analysts added a tailwind, a push Reddit‘with (NYSE: RDDT) the share price rose significantly in the last month of 2024. In December, the already popular shares of the social network rose by more than 16%, which strengthened its status as one of the most successful titles of the year.
Reddit is one of the newer technology and social media stocks on the scene. It hit the market just under a year ago (March 2024 to be exact, after it completed its initial public offering or IPO). Given that novelty and its near-instant popularity as an investment, several researchers have only recently started tracking the stock.
Two prominent ones started reporting on Reddit in December, both with fairly positive reviews. The first was the big four banks Wells Fargowhich rates it an overweight (i.e. a buy) with a price target of $206 per share. Another was Guggenheim, whose analyst Michael Morris also tagged the company as a buy at a slightly higher ($210 per share) fair value estimate.
According to reports, Morris believes that Reddit will benefit from the general growth in social media usage. It also has great potential to increase ad revenue and will have the opportunity to make more money from activities such as data licensing.
This optimism seems justified to me. Reddit’s revenue growth trajectory has been particularly impressive, with the company managing to increase this rate in each of the three quarters in 2024 reported so far (to 48%, 54% and 68%, respectively). The number of daily average “uniques” (read “users”), an important operational metric, continued to grow at double-digit percentage rates.
Also, somewhat atypically for tech stocks, Reddit has been profitable lately. It reported generally accepted accounting principles (GAAP) net income of just under $30 million in its latest report, following two straight quarters of losses.
Such a performance does not promote the attention of researchers who already follow the fortunes of Reddit. Several influential analysts became significantly more bullish on the stock in December, supporting expectations to buy it.
Among them were white shoe investment banks Morgan Stanleywhose analyst Brian Nowak upgraded his recommendation to overweight with a price target of $200 per share. He previously categorized it as equal weight (hold). According to reports, his thinking was similar to that of Guggenheim’s Morris.
Meanwhile, Ronald Josey of Citigroup brought a drastic increase in his price target on Reddit to $200 per share from his previous $120. Because that price level matches that of Morgan Stanley’s Nowak, Josey also rates Reddit a buy.
