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Tuesday, July 23, 2024

RDDT Likely to Experience A Pullback Before Continuing to The Upside

Technical Analysis:

Reddit looks like it could experience a sharp pullback especially from the last two days where Reddit has increased by more than 10%. It’s important to note that RDDT is still in an uptrend, and based on the earnings transcript and analyst price recommendations It could continue to move higher. But the safest play seems to be to wait until it reaches around the $65 level and then target the analyst price recommendation of $75.

Here are the highlights from Reddit’s Q1 2024 earnings call:

You can read the earnings transcript Here.

  • User growth: Daily active users grew 37% year-over-year to 82.7 million. The company added 9.6 million users sequentially, its largest increase in 3 years.
  • Revenue growth accelerated: Total revenue grew 48% year-over-year to $243 million. Advertising revenue grew 39% to $223 million.
  • Profitability milestone: Reddit achieved adjusted EBITDA profitability for the first time in Q1, with $10 million in adjusted EBITDA.
  • International expansion: International revenue grew 30% year-over-year. The company is investing in machine translation to drive growth outside the US.
  • New revenue streams: Data licensing revenue grew significantly, contributing $20 million in “Other Revenue”. Reddit signed deals with companies in social listening and AI.
  • Product improvements: Reddit rolled out its new web platform “Shreddit” to all users, which is 2x faster. It’s also investing in AI/ML to improve relevance and moderation.
  • Future focus areas: The company highlighted opportunities in user economy features, developer platform, on-platform search, and video.
  • Q2 guidance: Revenue of $240-255 million and adjusted EBITDA of $0-15 million.
  • Long-term strategy: Focus on core platform (70%), emerging areas like user economy (20%), and future initiatives (10%). Prioritizing investments in high-margin areas.

Overall, the executives expressed confidence in Reddit’s growth trajectory and monetization potential.

Analyst Price Targets For RDDT

Over the past two months, RDDT has seen an upward trend in analyst price targets. Several prominent financial institutions have revised their outlooks, with many boosting their price targets for RDDT stock.

Recently, on July 3, 2024, Loop Capital reaffirmed its “Buy” rating for RDDT and increased its price target from $60.00 to $75.00. This bullish sentiment was echoed by Needham & Company LLC on June 18, 2024, which also raised its target from $63.00 to $75.00 while maintaining a “Buy” rating.

In May, multiple analysts adjusted their price targets upward:

  1. Citigroup boosted its target from $65.00 to $70.00 on May 17, 2024.
  2. Deutsche Bank Aktiengesellschaft raised its target from $62.00 to $65.00 on the same day.
  3. The Goldman Sachs Group, despite maintaining a “Neutral” rating, increased its target substantially from $40.00 to $55.00 on May 9, 2024.
  4. Piper Sandler showed strong confidence by boosting its target from $50.00 to $65.00 on May 8, 2024, while maintaining an “Overweight” rating.

Even more conservative estimates saw increases, with Sanford C. Bernstein raising its target from $40.00 to $45.00 on May 8, 2024, despite maintaining an “Underperform” rating.

The consistent upward revisions across various financial institutions suggest growing confidence in RDDT’s potential. However, it’s worth noting that price targets vary widely, ranging from $45.00 to $75.00, indicating some divergence in analysts’ long-term outlooks for the stock.

Lazarus Lucas is the Publisher, editor, and creator of LJLNews. Stock Market enthusiast, with an interest for politics. Independent trader, analyst, and asset manager. Lazarus publishes articles on LJLNews with technical analysis on various markets, such as currencies, stocks, and commodities. Contact: Lazaruslucas@ljlnews.com

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