The Reddit stock price has been in a strong bull run in the past few months. RDDT jumped by almost 200% from its lowest level this year, giving it a market capitalization to over $44 billion. So, what next for the stock this year?
Reddit stock has jumped amid strong revenue growth
The RDDT stock price has been in a strong bull run this year, helped by the robust revenue and profitability growth.
A recent financial statement showed that its revenue rose by 78% in the second quarter to $500 million.
Most of this revenue was driven by the advertising business, whose revenue rose by 84% to $465 million.
Reddit is also seeing higher margins as the management focuses on profitability growth. Its gross margin rose to 90.8%, while the net income jumped to $89 million, up from a $10 million loss in the same period last year.
READ MORE: Reddit CEO has been selling RDDT stock: here’s why you shouldn’t
The company’s platform is also seeing more users from around the world. The daily active users jumped by 21% to 110.4 million, while the weekly actives rose to 416 million.
The company and Wall Street analysts believe that Reddit has more room to grow in the next few years.
Analysts are upbeat about Reddit
Data compiled by Yahoo Finance shows that the average revenue for the current quarter will be $545 million, up by 56% from the same period last year. The most optimistic analyst sees the revenue rising to $564 million, while the management guidance is that it will be between $535 million and $545 million.
Reddit’s earnings per share is expected to jump from 16 cents in Q3’24 to 51 cents in the same period this year.
Analysts expect that the annual revenue this year will be $2 billion, up by 58% from 2024. It will then hit $2.8 billion in 2026.
Also, the annual earnings per share will get to $1.88 this year and $3.23 in 2026.
Reddit’s performance will likely be better than estimates, as the management has proven to be highly conservative when providing their guidance. For example, it has beaten all analyst estimates since going public.
Reddit stock price has also done well as analysts maintained their bullish view. In a recent note, Jefferies analysts boosted their outlook to $300, up from the current $237.
The analyst pointed to its growing market share in the advertising industry, especially in the United States and the potential for a big renewal in its licensing agreement in 2027.
Most importantly, Reddit may benefit by monetizing its big library of content to companies building artificial intelligence models as Elon Musk’s xAI has done with X.
Argus analysts also boosted their forecast for the company, citing its strong technicals. They wrote:
“From a technical perspective, the shares have been in a bullish pattern of mostly higher highs and higher lows since the March market and technology sector selloff.”
Reddit stock price technical analysis
The daily timeframe chart shows that the RDDT stock price has retreated in the past few days, moving from a high of $282 to the current $237,
This retreat is important as the stock has retested a crucial support level, which was its highest point in February. A break-and-retest pattern is one of the most common bullish continuation signs in technical analysis.
Therefore, the stock will likely resume the bullish trend as investors focus on its growth, while ignoring the substantial valuation premium. If this happens, the RDDT stock price will blast past $300 in the coming weeks.
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