Tech drags stocks lower as rally hits pause
Reddit (RDDT) stock popped as much as 5% Wednesday after the company said in its first-ever quarterly earnings report that it expects better-than-expected sales growth in the current quarter and further progress on profitability.
Reddit said in its release on Tuesday that it expects Q2 revenue in the range of $240 million to $255 million, above Wall Street’s estimates for $228 million. The social media company also said it sees adjusted EBITDA in the current quarter in the range of $0 to $15 million. The Street had been expecting a loss of $13 million.
Reddit’s daily active users hit 82.7 million, up 9% from the prior quarter and faster than analysts had projected.
“Reddit delivered a strong first quarter post its IPO, in our view,” Citi analyst Ronald Josey wrote in a note to clients on Wednesday. “Importantly, we believe improving engagement trends are lasting.”
After initially soaring following its public offering in late March, Reddit shares tanked in the following weeks, falling from a peak of about $74 per share to just below $40 as concerns over the company’s lofty valuation and future potential revenue streams mounted.
But the report from the company that once hosted fodder for meme stock targets highlighted a trend recently seen in other names favored by retail traders. Reddit stock is moving higher after a quarter JPMorgan analyst Doug Anmuth described as “strong,” but not surging higher to a point that’s hard for analysts to reason with.
“We expect trends to remain strong through the year given recent tailwinds, and we raise our 2024 & 2025 revenue estimates by 11% & 12%, respectively,” Anmuth wrote.
Anmuth maintained a Neural rating on the stock while raising his price target to $57 from $47, noting that shares appear “fairly valued” right now.
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