Reddit stock jumped Tuesday after analysts at Piper Sandler set a higher price target for the recent IPO stock. The social media stock has soared nearly 200% since its debut in March.
In a note to clients Tuesday, Piper Sandler analyst Thomas Champion reiterated an overweight rating and upped his price target to 150, from 115. The note cited strong user growth metrics for October.
"While debate remains on the sustainability of user growth, our data gives us more confidence in the organic top of funnel for Reddit growth," Champion wrote to clients.
On the stock market today, Reddit stock is up more than 6% at 137.88
How Sustainable Is Reddit User Growth?
Reddit stock's strong run has been powered in part by accelerating user growth.
Daily active users for Reddit surged 47% year over year to reach 97 million last quarter. But investors are debating the sustainability of that growth. The prominent placement of Reddit forum results in Google search results has helped power its growth.
But it also appears users are seeking the website out: Reddit is the sixth most Googled phrase in the U.S. this year, according to Reddit CEO Steve Huffman. Still, changes in the algorithm Google uses to rank results could mean that users are directed to Reddit less often.
On that note, Champion wrote Tuesday that it appears Google is monetizing searches with the word "Reddit" by placing paid links above organic results. While that could be a risk to the so-called top of funnel growth for Reddit, Champion wrote, Piper Sandler did not see any immediate impact to the metrics it uses to track user growth on Reddit. Instead, October monthly active user growth accelerated to 3.5% month over month compared to 1% growth in September, according to Piper Sandler's estimates.
Piper Sandler upped its 2025 revenue estimates for Reddit by 5%, to $1.75 billion in the new client note. The analysts also increased their estimates for 2025 Reddit EBITDA (earnings before interest, taxes, depreciation, and amortization) by 15%, to $524 million. Those estimates are ahead of analysts consensus of $1.66 billion in 2025 sales and $455 million EBITDA, according to FactSet.
Reddit Stock Second In Internet-Content Group
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 reported 68% sales growth and its first quarter of profits since it started trading as a public company.
Reddit stock trails only internet browser make Opera among the top ranked stocks in the 83-stock Internet-Content group tracked by IBD.
Its IBD Composite Rating is 95 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Reddit stock is also on the premier IBD 50 list, as well as IBD's IPO Leaders and Tech Leaders lists.
