Reddit (NYSE:RDDT) Issues Earnings Results

Reddit (NYSE:RDDT) released its quarterly earnings data on Thursday. The company reported $1.25 earnings per share for the quarter, topping analysts’ consensus estimates of $0.95 by $0.30, Zacks reports. Reddit had a return on equity of 29.97% and a net margin of 31.35%.The company had revenue of $804.91 million for the quarter, compared to analyst estimates of $731.00 million. During the same quarter in the previous year, the company posted $0.45 earnings per share. The firm’s revenue for the quarter was up 61.0% compared to the same quarter last year.

Here are the key takeaways from Reddit’s conference call:

• Strong financial performance: Q2 revenue rose 61% year over year to $805 million, advertising revenue increased 64% to $762 million, and adjusted EBITDA margin reached 43%. Operating cash flow more than doubled to $262 million, with last-twelve-month operating cash flow surpassing $1 billion.
• Advertising momentum remained broad-based. Active advertisers grew more than 70%, scaled-channel revenue doubled, conversion volume increased over 100%, and Reddit Max revenue rose more than 150% sequentially as automation and lower-funnel products gained adoption.
• User growth faced search-referral headwinds. Product-driven gains in daily active users were offset by declining and volatile search traffic, particularly late in the quarter; management acknowledged that user retention remains below industry peers and that direct-user growth will take time.
• Management guided to continued growth in Q3, forecasting revenue of $860 million to $870 million and adjusted EBITDA of $385 million to $395 million, or a 45% margin at the midpoint. Reddit also lowered its full-year stock-based compensation outlook and repurchased approximately $235 million of stock, with $760 million remaining under its authorization.
• Reddit is investing heavily in its product roadmap, including improved feed technology, app onboarding, video, search, shopping ads, and SMB automation. Executives also said data-licensing outcomes with major AI companies remain uncertain and will depend on maximizing value across multiple potential uses.

Reddit Stock Down 21.0%

NYSE RDDT traded down $37.37 on Friday, reaching $140.67. The stock had a trading volume of 29,841,129 shares, compared to its average volume of 4,138,941. Reddit has a 12-month low of $119.27 and a 12-month high of $282.95. The stock has a fifty day moving average price of $176.72 and a two-hundred day moving average price of $164.92. The firm has a market capitalization of $27.08 billion, a price-to-earnings ratio of 32.71 and a beta of 1.93.

Wall Street Analysts Forecast Growth

Several research analysts have recently weighed in on RDDT shares. Needham & Company LLC reissued a “buy” rating and set a $300.00 price target on shares of Reddit in a research report on Wednesday, June 24th. Zacks Research upgraded shares of Reddit from a “hold” rating to a “strong-buy” rating in a report on Monday, July 27th. Raymond James Financial set a $180.00 price target on shares of Reddit and gave the company a “market perform” rating in a research report on Friday, May 1st. B. Riley Financial increased their price objective on Reddit from $250.00 to $270.00 and gave the stock a “buy” rating in a research report on Friday. Finally, Citizens Jmp cut their target price on Reddit from $250.00 to $240.00 and set a “market outperform” rating for the company in a research note on Friday, May 1st. Two investment analysts have rated the stock with a Strong Buy rating, twenty have assigned a Buy rating and eleven have given a Hold rating to the company’s stock. According to data from MarketBeat.com, the stock currently has an average rating of “Moderate Buy” and a consensus price target of $223.16.

Key Reddit News

Here are the key news stories impacting Reddit this week:

• Positive Sentiment: Reddit reported second-quarter revenue of approximately $805 million, up 61% year over year, while earnings of $1.25 per share exceeded analysts’ estimates. Advertising demand, higher pricing and user growth supported stronger monetization. Reddit crushes revenue and earnings estimates, issues strong guidance
• Positive Sentiment: Management forecast third-quarter revenue of $860 million to $870 million, above Wall Street’s approximately $830 million expectation. AI-powered advertising tools, product upgrades and continued ad growth are expected to support momentum. Reddit expects revenue above estimates as AI tools attract advertisers
• Positive Sentiment: Analyst sentiment remains mixed but includes bullish views: Truist raised its price target to $275 and maintained a buy rating, while Wedbush kept an outperform rating with a $221 target. KeyCorp also upgraded Reddit to “strong buy.” Reddit analyst actions
• Neutral Sentiment: Reddit is testing a “video Reddit” experience that could let users watch videos and listen to posts in the background, potentially increasing engagement and creating new advertising opportunities over time. Reddit is testing a new way to watch and listen to its viral posts
• Negative Sentiment: The primary selloff trigger was management’s warning that search referrals have become “choppy” or volatile. Investors fear Google’s AI-generated search summaries and other AI search tools could reduce traffic to Reddit, weakening future user growth, engagement and advertising monetization. Reddit Stock Plunges on Choppy Search Referrals Warning
• Negative Sentiment: Investors were also disappointed by slower U.S. daily-user growth and the lack of announced new AI licensing deals, raising questions about Reddit’s longer-term traffic outlook. JPMorgan and Cantor Fitzgerald responded by lowering their price targets to $185 and $170, respectively, while assigning neutral ratings. Reddit earnings: why are investors concerned despite solid headline numbers

Insider Buying and Selling

In other news, COO Jennifer L. Wong sold 39,167 shares of the firm’s stock in a transaction that occurred on Monday, May 18th. The shares were sold at an average price of $158.52, for a total value of $6,208,752.84. Following the completion of the transaction, the chief operating officer owned 1,088,451 shares of the company’s stock, valued at approximately $172,541,252.52. This trade represents a 3.47% decrease in their ownership of the stock. The transaction was disclosed in a document filed with the SEC, which can be accessed through the SEC website. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CAO Michelle Marie Reynolds sold 808 shares of the company’s stock in a transaction that occurred on Wednesday, July 1st. The stock was sold at an average price of $200.00, for a total transaction of $161,600.00. Following the sale, the chief accounting officer directly owned 15,060 shares in the company, valued at approximately $3,012,000. The trade was a 5.09% decrease in their ownership of the stock. The SEC filing for this sale provides additional information. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. In the last 90 days, insiders have sold 169,141 shares of company stock valued at $28,680,845. Corporate insiders own 28.48% of the company’s stock.

Institutional Trading of Reddit

A number of large investors have recently modified their holdings of the stock. Bamco Inc. NY acquired a new position in Reddit during the fourth quarter worth approximately $182,000. DV Equities LLC purchased a new position in shares of Reddit during the fourth quarter worth approximately $92,000. Transamerica Financial Advisors LLC grew its position in shares of Reddit by 91.8% during the fourth quarter. Transamerica Financial Advisors LLC now owns 652 shares of the company’s stock worth $150,000 after acquiring an additional 312 shares during the last quarter. Silicon Valley Capital Partners purchased a new stake in Reddit in the 4th quarter valued at $115,000. Finally, IFC & Insurance Marketing Inc. purchased a new stake in Reddit in the 4th quarter valued at $86,000.

Reddit Company Profile

Reddit is an online social news aggregation, discussion and content-sharing platform organized around user-created communities called “subreddits,” each focused on a particular topic or interest. Registered users submit links, text posts, images and video, and community members vote and comment to surface popular content. The site is accessed via its web platform and mobile apps for iOS and Android, and it supports live events such as Ask Me Anything (AMA) sessions and community-driven discussions.

Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit is headquartered in San Francisco and serves a global audience with particularly large user bases in the United States and other English-speaking markets.