On Tuesday, Piper Sandler increased the price target for Reddit (NYSE: RDDT) shares from $150.00 to $197.00, while keeping an Overweight rating on the stock. According to InvestingPro data, analysts' targets now range from $85 to $210, with a consensus recommendation of 1.95 (Buy). The stock, currently valued at $28.91 billion, appears slightly overvalued based on InvestingPro's Fair Value analysis.
The firm's analysts cited data from Piper Sandler Ads Manager which indicated low single-digit month-over-month user growth and stable to declining Cost Per Click (CPC) rates. This trend suggests an expansion in both user base and available ad inventory, which are seen as positive signs for future revenue growth.
The analysts highlighted that product improvements such as enhanced Search features and the introduction of Answers could make the platform more appealing. They also noted that the company's guidance seems to be on the cautious side.
For the fourth quarter, Piper Sandler forecasts Reddit's revenue to reach $402 million, marking a 61% increase year-over-year, alongside an EBITDA of $116 million. InvestingPro data reveals impressive gross profit margins of 89.25% and projects continued revenue growth of 59% for the current year. The platform maintains a strong liquidity position with a current ratio of 11.96.
The optimistic outlook is based on the expectation that the growing user engagement and inventory will lead to better monetization opportunities for Reddit. The analysts' revenue and EBITDA projections for the fourth quarter underscore a significant potential for growth, reflecting the positive developments in the platform's user metrics and product offerings.
The maintenance of the Overweight rating suggests that Piper Sandler's analysts believe Reddit's stock will outperform the average return of the stocks the firm covers over the next 12 to 18 months. The price target adjustment reflects the confidence in Reddit's potential for increased monetization and overall financial performance.
Reddit's stock price adjustment by Piper Sandler is informed by the latest data and the company's strategic enhancements, indicating a promising outlook for the social media platform's financial growth. For deeper insights into Reddit's financial health and growth potential, InvestingPro subscribers can access 13 additional ProTips and a comprehensive Pro Research Report, offering expert analysis of what really matters for this rapidly growing social media platform.
In other recent news, Reddit has been experiencing significant developments. The social media platform reported a 68% increase in total revenue and a 56% rise in advertising revenue. B.Riley analysts have increased their price target on Reddit to $187.00, maintaining a Buy rating on the company's shares. They anticipate a substantial rise in advertising revenue due to a growing user base and enhanced monetization strategies.
Morgan Stanley (NYSE:MS) has upgraded Reddit's stock from Equalweight to Overweight, setting a new price target of $200. The firm anticipates a 35% growth in U.S. advertising revenue for Reddit between 2024 and 2027. However, BofA Securities maintained a Neutral rating on Reddit, warning of a potential slowdown in the second half of 2025.
Citi has lifted Reddit's price target from $120 to $200, maintaining a Buy rating. The firm cites Reddit's sustained engagement growth and the introduction of new products as key drivers for this optimistic outlook. Needham has raised Reddit's price target to $190, based on the company's robust user growth and increasing average revenue per user.
Despite these positive developments, Reddit recently experienced a major outage affecting thousands of users following a software bug fix. These are the recent developments in the company's performance and market position.
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