New Reddit Price Target After 'Blowout Quarter'
Shares of Reddit jump after earnings, but will the move continue?
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A few years ago, I’d never heard of Reddit RDDT. Today, I consider it an invaluable resource.
Do you have a favorite band or author? Want to learn more about a specific cryptocurrency? Are you having surgery soon, and want to speak to others who have already had the procedure?
Whatever strikes your fancy, there is probably a Reddit community, known as a "subreddit," where you can learn more about it. Whatever your interests, there’s a chance they’re being discussed somewhere on Reddit.
Reddit’s Chart Is Heating Up
Since its initial public offering in March 2024, shares of Reddit have gained nearly 250%. Shares of the San Francisco-based news aggregation and discussion website have gained 163% over the past 12 months, but are down by about 3% year to date.
However, the technical picture for Reddit is beginning to brighten. Reddit has formed a pattern known as a cup and handle (shaded yellow).
This bullish formation suggests that Reddit could soon challenge its all-time closing high of $225 (black arrow). We’re using that figure as our new price target for the stock.
That move, should it occur, would represent a 40% gain from Thursday’s closing price.
Reddit is trading above its key 50-day (blue) and 200-day moving averages. On Thursday, the stock closed at its highest level in three months. That was before Reddit reported earnings after Thursday's close.
Solid Earnings and Revenue, Raises Estimates
Reddit shares jumped 7.5% on Thursday during regular trading hours, and climbed an additional 15% after blowing out earnings and revenue estimates for its second quarter. Reddit also raised guidance for the current quarter.
Reddit earned 45 cents per share, crushing estimates of just 20 cents, along with the whisper number of 30 cents per share. Revenue of $500 million for the quarter exceeded estimates by about 17%.
What was the most impressive part of Reddit’s report? Perhaps it was the 21% increase in daily active users, now at 110.4 million. Or maybe it was the 78% year-over-year growth in revenue, or the company’s year-over-year gross margin expansion to 90.8%
Bottom Line
Reddit isn’t an AI chip stock. It isn’t the flavor of the month.
That’s actually good news. Reddit's lack of notoriety has caused some investors to overlook this name. After Thursday’s blowout quarter, investors who sleep on Reddit do so at their own peril.
At the time of publication, Ponsi was long RDDT.
