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Reddit Stock Surges 167% Year to Date: Should You Buy the Stock?
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Reddit (RDDT - Free Report) shares have surged 167.3% in the year-to-date period compared with the broader Zacks Computer & Technology sector’s appreciation of 30%.
RDDT shares have also outperformed the Zacks Internet Software industry and its peer Snap (SNAP - Free Report) over the same time frame.
While Snap shares have plummeted 29% year to date, the industry has appreciated 29.8%.
Reddit’s robust stock price performance has been driven by its impressive third-quarter 2024 results.
YTD Performance
Image Source: Zacks Investment Research
RDDT Shares Rides on Strong Q3 Earnings
Reddit’s total revenues grew 68% year over year to $348.4 million. This was driven primarily by a 56% year-over-year increase in advertising revenues, which accounted for $315.1 million. Increased ad impressions, more efficient ad load, and the expansion of conversation placement ads contributed to this growth.
The increase in ad impressions and the expansion of conversation placement ads helped drive engagement, as evidenced by a 40% year-over-year increase in conversation pageviews.
In the third quarter of 2024, Reddit enhanced its ad products, including conversation ads and tools like auto bidding and CAPI (Conversions API), which drove higher conversion rates. The ad business also benefited from strong performance in various sectors, including auto, consumer goods, and pharmaceuticals.
As a result of this enhanced ad performance, Reddit saw a 47% year-over-year increase in daily active users (DAUs), reaching over 97 million DAUs and surpassing 100 million DAUs for the first time during the third quarter.
Expanding International footprint has been noteworthy. During the third quarter, International DAUs grew 44% year over year, with a notable 53% increase in focus markets like France, India, and the Philippines. Reddit’s expansion into new languages, including Spanish, Portuguese, Italian, and German, through machine translation helped attract more global users.
Expanding Clientele Aids RDDT’s Prospects
Expanding clientele has also been a major growth drive for RDDT’s success. In the third quarter, Reddit expanded its data licensing business, securing a key partnership with Meltwater. This deal allows Meltwater to access Reddit’s content for brand insights and trend monitoring, positioning Reddit as a key player in the data licensing space.
Reddit is also leveraging its extensive content to enhance search and AI capabilities, forming partnerships with companies such as Alphabet (GOOGL - Free Report) and OpenAI.
Reddit’s partnership with Google boosts content discovery and community engagement by providing access to Reddit’s Data API. This enhances Google’s products and supports AI advancements, benefiting both companies and reinforcing Reddit’s position as a key player in the tech industry.
Reddit’s partnership with OpenAI enhances user engagement by integrating Reddit content into ChatGPT and other AI products. This collaboration also enables Reddit to introduce AI-powered features for users and moderators, improving the platform’s overall experience and competitiveness.
In June, RDDT expanded its partnership with Sprinklr (CXM - Free Report) , integrating Reddit’s Data API and Ads API to enhance customer insights and advertising approaches.
The collaboration allows Sprinklr users to leverage real-time Reddit conversations and ad solutions for improved brand engagement and Return on Investment.
RDDT Shares Trade at a Premium
We point out that RDDT stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the trailing 12-month Price/Book ratio, RDDT is trading at 11.97X, higher than its median of 5.26X and the broader Zacks Computer & Technology sector’s 10.69X.
Price/Book Ratio (TTM)
Image Source: Zacks Investment Research
RDDT Earnings Estimates Show Upward Movement
For the fourth quarter of 2024, RDDT expects revenues between $385 million and $400 million, which indicates growth of 54%-60% (57% at the mid-point).
For the fourth quarter, the Zacks Consensus Estimate for revenues is pegged at $399.59 million.
The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 19 cents per share, which has increased 5.33% in the past 30 days.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Conclusion
We believe RDDT’s strong user growth, enhanced ad product offerings and partnerships are driving continuous top-line growth and enhancing its growth prospects.
RRDT stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of B, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Image: Bigstock
Reddit Stock Surges 167% Year to Date: Should You Buy the Stock?
Reddit (RDDT - Free Report) shares have surged 167.3% in the year-to-date period compared with the broader Zacks Computer & Technology sector’s appreciation of 30%.
RDDT shares have also outperformed the Zacks Internet Software industry and its peer Snap (SNAP - Free Report) over the same time frame.
While Snap shares have plummeted 29% year to date, the industry has appreciated 29.8%.
Reddit’s robust stock price performance has been driven by its impressive third-quarter 2024 results.
YTD Performance
Image Source: Zacks Investment Research
RDDT Shares Rides on Strong Q3 Earnings
Reddit’s total revenues grew 68% year over year to $348.4 million. This was driven primarily by a 56% year-over-year increase in advertising revenues, which accounted for $315.1 million. Increased ad impressions, more efficient ad load, and the expansion of conversation placement ads contributed to this growth.
The increase in ad impressions and the expansion of conversation placement ads helped drive engagement, as evidenced by a 40% year-over-year increase in conversation pageviews.
In the third quarter of 2024, Reddit enhanced its ad products, including conversation ads and tools like auto bidding and CAPI (Conversions API), which drove higher conversion rates. The ad business also benefited from strong performance in various sectors, including auto, consumer goods, and pharmaceuticals.
As a result of this enhanced ad performance, Reddit saw a 47% year-over-year increase in daily active users (DAUs), reaching over 97 million DAUs and surpassing 100 million DAUs for the first time during the third quarter.
Expanding International footprint has been noteworthy. During the third quarter, International DAUs grew 44% year over year, with a notable 53% increase in focus markets like France, India, and the Philippines. Reddit’s expansion into new languages, including Spanish, Portuguese, Italian, and German, through machine translation helped attract more global users.
Expanding Clientele Aids RDDT’s Prospects
Expanding clientele has also been a major growth drive for RDDT’s success. In the third quarter, Reddit expanded its data licensing business, securing a key partnership with Meltwater. This deal allows Meltwater to access Reddit’s content for brand insights and trend monitoring, positioning Reddit as a key player in the data licensing space.
Reddit is also leveraging its extensive content to enhance search and AI capabilities, forming partnerships with companies such as Alphabet (GOOGL - Free Report) and OpenAI.
Reddit’s partnership with Google boosts content discovery and community engagement by providing access to Reddit’s Data API. This enhances Google’s products and supports AI advancements, benefiting both companies and reinforcing Reddit’s position as a key player in the tech industry.
Reddit’s partnership with OpenAI enhances user engagement by integrating Reddit content into ChatGPT and other AI products. This collaboration also enables Reddit to introduce AI-powered features for users and moderators, improving the platform’s overall experience and competitiveness.
In June, RDDT expanded its partnership with Sprinklr (CXM - Free Report) , integrating Reddit’s Data API and Ads API to enhance customer insights and advertising approaches.
The collaboration allows Sprinklr users to leverage real-time Reddit conversations and ad solutions for improved brand engagement and Return on Investment.
RDDT Shares Trade at a Premium
We point out that RDDT stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the trailing 12-month Price/Book ratio, RDDT is trading at 11.97X, higher than its median of 5.26X and the broader Zacks Computer & Technology sector’s 10.69X.
Price/Book Ratio (TTM)
Image Source: Zacks Investment Research
RDDT Earnings Estimates Show Upward Movement
For the fourth quarter of 2024, RDDT expects revenues between $385 million and $400 million, which indicates growth of 54%-60% (57% at the mid-point).
For the fourth quarter, the Zacks Consensus Estimate for revenues is pegged at $399.59 million.
The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 19 cents per share, which has increased 5.33% in the past 30 days.
Reddit Inc. Price and Consensus
Reddit Inc. price-consensus-chart | Reddit Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Conclusion
We believe RDDT’s strong user growth, enhanced ad product offerings and partnerships are driving continuous top-line growth and enhancing its growth prospects.
RRDT stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of B, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.