Reddit stock is gaining pre-market Wednesday after the social media platform released its inaugural earnings report as a public company. Investors and analysts have now turned their attention to dissecting its performance and forecasting future trajectories.
Reddit Earnings
Reddit reported a first-quarter net loss of $575.1 million. Revenue rose 48% year-on-year to $243 million, and adjusted EBITDA was $10 million.
The company also reported record user traffic, with Daily Active Uniques (DAUq) increasing 37% to 82.7 million and weekly Active Uniques (WAUq) increasing 40% year-over-year to 306.2 million.
“It was a strong start to the year and a milestone quarter for Reddit and our communities as we debuted as a public company,” said Steve Huffman, Co-Founder and CEO of Reddit. “We see this as the beginning of a new chapter as we work towards building the next generation of Reddit.”
Looking ahead, the company expects second-quarter revenue between $240 million and $255 million, with adjusted EBITDA between $0 and $15 million.
Analyst Discuss Reddit’s Performance
Reacting to the results, analysts across the board released notes covering the stock. Here’s what they said:
BofA noted the strong execution in the first quarter but stated that a lot is already priced in. The bank reiterated a Neutral rating on the stock. “1Q was exceptionally strong for the Online ad industry, and we would expect quarterly user and revenue growth volatility based on history, while valuation is at a premium to peers at close to 7x 2025 revenues,” wrote BofA.
Piper Sandler said the results were well ahead of expectations. The firm maintained an Overweight rating on the stock, lifting the price target to $65 from $50 per share. “In its first quarter out of the gates, RDDT handily beat expectations across users, revenue growth and margins. In our view, Reddit remains early days in the development of the ads business and we think a large international user opportunity remains untapped,” said Piper Sandler analysts.
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Raymond James said Reddit is still in the early chapters of its platform build. The firm reiterated a Strong Buy rating on the stock. “Reddit posted a high-quality inaugural public quarter beat/raise ahead of the Street median by 15/12%, topping buyside expectations with key metric U.S. DAUq of 41.5M well ahead of buyside looking for 38.5-40.0M,” stated the firm. “We walked away more convicted in our constructive structural DAUq growth debate stance as evidenced by strong logged-out/logged-in growth and management emphasis on the ‘consistent’ nature of DAUq growth benefiting from improved web stack performance (faster loading), ML algos (relevance) and Google (NASDAQ:GOOGL) forums & discussions focus.”
New Street Research said DAUq growth exceeded even their lofty expectations. In addition, while advertising revenue likely decelerates slightly in 2Q, they believe the roadmap remains robust.
Bernstein analysts commented that Reddit beat their bullish expectations. “Reddit appears to be reaping the benefits of a strong digital ad market, buoyed by some ‘free’ IPO-marketing, alongside increased traffic courtesy of their new favorite AI partner Google,” explained Bernstein.
