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Investing in initial public offerings, or IPOs, can be a game-changing decision for long-term shareholders. Ideally, an IPO allows investors to get in at the ground floor of a company’s growth story and benefit from outsized gains over time.
One upcoming IPO that is closely watched by Wall Street is Reddit, a social media company. According to a report from The Wall Street Journal, Reddit plans to price its shares between $31 and $34, indicating a valuation of roughly $6.5 billion. Further, it will list on the NYSE, and trade under the ticker symbol RDDT.
Key Numbers for Reddit
Reddit last raised $1.3 billion in the private market, valuing the company at $10 billion. However, an uncertain and challenging macro environment since then has led Reddit to lower its expectations in terms of valuation.
One of the largest shareholders of Reddit is Sam Altman, the CEO of OpenAI. Altman led a $50 million investment round in Reddit almost a decade ago, and owns 6.9% of the company, which would now be worth $400 million.
Reddit reported revenue of $804 million in 2023, an increase of 20% year over year, compared to $666.7 million in 2022. The social media entity remains unprofitable and reported a net loss of $90.8 million, narrower than its prior-year loss of $158.6 million.
META Stock: Then and Now
One of the most successful social media IPOs in the last 15 years has been Meta Platforms (META). The social media behemoth went public as Facebook in May 2012, and priced its IPO at $38 per share.
Today, META trades around $500 per share, indicating cumulative gains of 1,213%. So, an investment of $10,000 in Meta’s IPO would be worth more than $121,000 today.
Meta Platforms Stock Is Up 169% In the Last Year
After getting hammered in 2022, Meta stock staged a remarkable comeback in the last 14 months. Since March 2023, META stock has gained 169%, allowing it to reclaim its trillion-dollar valuation.
In 2022, Meta’s sales fell by 1%, while earnings declined by 38% year over year. Comparatively, in 2023, sales grew by 16% while earnings widened by 73% year-over-year, driven by higher ad revenue and a focus on cost efficiencies.
Despite its massive size, Meta’s growth story appears to be far from over. Analysts tracking META expect sales to rise from $135 billion in 2023 to $178 billion in 2025. Comparatively, adjusted earnings per share are forecast to touch $47.5 by 2028. So, if META stock is priced at 25 times earnings, it should trade at $1,200.
Meta Announces a Quarterly Dividend
During its Q4 earnings call, Meta announced a quarterly dividend of $0.50 per share, indicating a forward yield of 0.4%. Meta increased its cash flow from $19 billion in 2022 to $44 billion in 2023, allowing it to end the year with $65.4 billion in cash. Comparatively, its balance sheet debt is much lower at $18.4 billion.
Due to its stellar Q4 earnings, Meta stock surged over 20% in a single trading session, resulting in a one-day market cap gain of roughly $200 billion - a new record at the time, until it was beaten by Nvidia (NVDA) a few days later.
What is the Target Price for META Stock?
Out of the 44 analysts covering Meta stock, 39 recommend “strong buy,” one recommends “moderate buy,” three recommend “hold,” and one recommends “strong sell.” The average target price for META is $500.98, which is nearly flat with the current share price - although the Street-high price target of $575 is a premium of 15.4%.
