Reddit stock nabbed a pair of price-target hikes from analysts on Monday. The bullish new estimates come as Reddit tries to build off a red-hot run during its first year as a public company.
Analysts with both Jefferies and JMP Securities increased their price target for Reddit stock in separate client notes early Monday. Reddit stock has gained nearly 200% following its March IPO.
Jefferies analyst John Colantuoni said Reddit is still early in its monetization efforts and could have strong advertising revenue growth ahead, based on how social media rivals Pinterestand Snap grew at similar stages.
"PINS/SNAP in the years following 2017/2016 offer valuable insights into RDDT's current outlook, given these periods are when each had similarly nascent ad stacks," Colantuoni wrote. "We found PINS/SNAP delivered roughly 50% revenue compound annual revenue growth in the subsequent 3 years (U.S. only), which would imply nearly 35% upside to 2026 consensus if RDDT achieved the same trajectory."
Colantuoni estimates that Reddit could maintain 25% or more annual revenue growth through 2026. While user growth will slow from the 47% surge in Reddit's previous quarter, Jefferies projects that Reddit can drive higher average revenue per user over time.
Jefferies reiterated a buy rating for Reddit stock and set a price target of 175, up from 120.
Reddit stock is trading sideways near 145.50 in recent action on the stock market today. Shares have flipped between gains 2.5% and a loss of 1.5%. Reddit stock slid on Friday but still closed ahead 17% overall for the week.
Reddit's International Buildup
Meanwhile, JMP Securities analyst Andrew Boone hiked his price target of Reddit to 160, from 118. JMP rates Reddit stock outperform.
In a client note Monday, Boone said he is "confident that Reddit's operational momentum can continue" following a meeting with the company's leadership team.
"While we acknowledge tougher comps and the increased share price, Reddit has multiple product catalysts near term including greater personalization of the service (including for logged-out users), international ramping with both better local content and machine translation, search improvements, and better advertising and measurement tools," Boone wrote.
Reddit Stock: Rally Takes Breather
Reddit's big rally took a breather on Friday, with shares falling 7% on the day. The slide followed news that a major Reddit shareholder – Advance Magazine Publishers – planned to borrow against its stake in the company. That news followed a large sale from a separate shareholder, Chinese technology company Tencent.
Still, the decline Friday only took a small bite out of Reddit's big gains in recent weeks. Shares turned red-hot after the company posted a surprise profit with its third-quarter results in late October. Reddit stock is up 22% in November and gained 81% in October.
Reddit broke out from a cup-with-handle base buy point of 69.11 on Oct. 4. The stock then gapped up a massive 42% on Oct. 30, after the company's third-quarter earnings report.
Reddit stock is also on the premier IBD 50 list, as well as IBD's IPO Leaders and Tech Leaders lists.
