On Friday, Citi reaffirmed its confidence in Reddit (NYSE: RDDT), lifting the social media company's price target to $200 from the previous $120 while maintaining a Buy rating. Currently trading at $163.72 with a market capitalization of $28.75 billion, the stock has seen remarkable growth, with analyst targets ranging from $85 to $206. The adjustment comes on the heels of positive advertiser feedback, robust user engagement, and the introduction of new products such as Reddit Answers.
The analyst cited several factors contributing to the optimistic outlook, including Reddit's sustained engagement growth and the launch of new products that are expected to serve as catalysts for further user interaction. The platform's increasing recognition and the rollout of fresh offerings are seen as key drivers behind this sentiment. According to InvestingPro data, Reddit boasts impressive revenue growth of 48.7% and maintains a strong gross profit margin of 89.25%.
Advertiser conversations indicate a rising demand for Reddit's advertising space, attributed to the platform's expansive user base. The anticipation of new advertising products, including Search, Video, Dynamic Product Ads, and forthcoming campaign automation tools, is expected to open up additional opportunities for advertising revenue.
Despite an increase in EBITDA projections, Reddit is actively investing in various areas, such as sales, search technology, artificial intelligence/machine learning, and engineering talent. These investments are part of the company's strategy to bolster its infrastructure and capabilities.
Reddit has been identified as one of Citi's top small to mid-cap (SMID) picks for the year 2025. The firm's reiterated Buy rating reflects its belief in Reddit's potential for continued growth and success in the social media sector.
InvestingPro analysis shows the company maintains a GOOD overall financial health score, with 12 additional exclusive tips available for subscribers. Get access to the comprehensive Pro Research Report for deeper insights into Reddit's financial outlook and valuation metrics.
In other recent news, Reddit has been a focal point due to significant financial performance and growth trajectory. The social media platform reported a 68% increase in total revenue and a 56% rise in advertising revenue.
Investment firm Needham has increased Reddit's price target to $190, maintaining a Buy rating, reflecting confidence in the company's financial growth. Loop Capital also raised its Reddit price target to $180, while Morgan Stanley (NYSE:MS) upgraded Reddit's stock from Equalweight to Overweight, setting a new price target of $200.
Baird has maintained a Neutral stance on Reddit shares but significantly raised the price target to $160. These recent developments underscore the positive outlook for Reddit's continued growth and financial success. However, Reddit recently encountered a major outage affecting thousands of users following a software bug fix, for which the company has not yet released a statement.
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