Reddit’s Stellar 2024: Can the Social Media Giant Continue Its Hot Streak in 2025?
After a remarkable 2024, Reddit is poised to take on the new year with confidence. The social media platform completed its initial public offering in March and saw its stock soar 250% higher from its first-day closing price. This impressive performance has earned Reddit a spot on the prestigious IBD 50 list, as well as IBD’s IPO Leaders and Tech Leaders lists.
Wall Street Analysts Weigh In
Morgan Stanley analysts recently upgraded Reddit to a buy rating, joining 12 other Wall Street analysts who share the same sentiment. Only one analyst has a sell call, while seven others have a hold or neutral rating. This overwhelming support from analysts is a testament to Reddit’s strong performance and growth potential.
Earnings Expectations
Reddit is expected to release its earnings report for the December quarter in February, which will be a crucial test of the company’s recent rally. The previous third-quarter report in October showed 68% sales growth and a surprise profit, sending shares soaring. Reddit stock added 18% in November and 26% in December, entering Friday.
User Growth and Monetization
Reddit’s user growth has accelerated this year, driving the company’s efforts to monetize its platform through advertising. Analysts project Reddit to reach $1.28 billion in 2024 sales, up from $804 million in 2023 and $668 million in 2022. Needham analyst Laura Martin recently upped her price target on Reddit stock to 190, citing key areas driving growth, including higher Reddit search and shopping revenues, and higher international revenues.
Challenges and Opportunities
While Reddit’s reliance on Google search for attracting users is a concern, the company is working on an AI-powered feature called Reddit Answers to help people take their search queries directly to Reddit. However, Bernstein analyst Mark Shmulik notes that Reddit’s investments in search and ad tech may offer less upside to margins going forward.
Stock Performance
Reddit stock was a fraction lower in premarket trading near 175.66, after closing a fraction lower Thursday at 176.74. Shares have remained well above Reddit’s 50-day and 21-day moving averages since the company’s third-quarter earnings report. Reddit has a best-possible IBD Relative Strength Rating of 99 and an IBD Composite Rating of 96 out of a best-possible 99.
What’s Next for Reddit?
As Reddit enters 2025, the company will need to continue to innovate and grow its user base to maintain its momentum. With a strong track record and optimistic analyst forecasts, Reddit is poised to remain a top performer in the social media space.
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