Technology
Wednesday, October 30th, 2024 3:33 pm EDT
Key Points
- Strong Financial Performance: Reddit’s shares surged 35% after the company posted a surprising third-quarter profit, with revenue up 68% year-over-year to $348.4 million, exceeding analyst expectations.
- User Growth and Raised Outlook: Daily active users grew 47% to 97.2 million, prompting analysts to raise Reddit’s stock price target from $70 to $120, while Reddit projected higher fourth-quarter revenue than anticipated.
- Analyst Optimism and AI Success: Analysts see Reddit benefiting from post-IPO changes, ad revenue growth, and AI integration, likening its rapid transformation to a “Dr. Jekyll and Mr. Hyde” shift in performance.
Reddit’s shares surged by 35% on Wednesday after the social media company reported unexpected profitability in its third-quarter financial results, along with promising revenue guidance. Reddit’s revenue jumped 68% from the prior year to $348.4 million, surpassing analysts’ expectations of $312.8 million. Additionally, the company reported a net income of $29.9 million, equivalent to 16 cents per share, marking a significant turnaround from the previous year’s net loss of $7.4 million or a 13-cent loss per share. This unexpected profitability exceeded analyst projections, which had anticipated a 7-cent loss per share.
Looking ahead, Reddit projected fourth-quarter revenue between $385 million and $400 million, well above the $357.9 million estimate by analysts. CEO Steve Huffman noted the company’s strong performance, highlighting record user engagement, revenue growth, and newly achieved profitability. Reddit’s daily active unique users increased 47% year-over-year, reaching 97.2 million, a growth rate that analysts at Citi praised, reiterating their buy rating and raising their stock target price from $70 to $120.
The positive report prompted a wave of analyst support. JP Morgan analysts credited Reddit’s structural improvements, particularly in user acquisition, product development, and monetization. They expect ongoing progress in expanding advertiser reach and developing ad formats such as Search, Conversation Ads, and Shopping Ads, aligning with Reddit’s long-term adjusted EBITDA margin goal of 40%. Meanwhile, Bernstein analysts drew a “Dr. Jekyll and Mr. Hyde” comparison, describing Reddit’s post-IPO transformation as striking. Previously seen as stagnant, Reddit has now become an “AI winner,” driving ad revenue growth, leveraging user growth through translation and Google integration, and achieving profitability goals far ahead of schedule. This recent shift has sparked optimism among investors and analysts, with many now viewing Reddit as a high-growth company with potential for sustained profitability and innovation in the advertising space.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/10/30/reddit-shares-soar-35percent-on-profitability-rosy-guidance-.html
