Reddit had a huge 2024 — completing an initial public offering in March before RDDT stock soared 250% higher from its first-day closing price. Can the social media player add to its hot run in 2025?
The 19-year-old Reddit has steadily won over doubters on Wall Street, most recently landing an upgrade to a buy rating from Morgan Stanley analysts. Heading into 2025, Reddit has 13 buy ratings from Wall Street analysts, according to FactSet. That's compared against 7 hold or neutral calls and one sell call.
The company's strong performance has landed Reddit stock on the premier IBD 50 list, as well as IBD's IPO Leaders and Tech Leaders lists.
Reddit is expected to publish earnings results for the current December quarter in February — offering what could be the first test of the company's big recent rally. Shares soared after Reddit's previous third-quarter report in late October, which showed 68% sales growth and a surprise profit.
Reddit stock added 18% in November after it gained 81% in October. Shares were up 26% for December entering Friday.
Analyst View On Reddit Stock
User growth has accelerated this year, boosting Reddit's push to monetize its platform through advertising. Reddit is projected to reach $1.28 billion in 2024 sales, according to FactSet analyst consensus, compared with $804 million in 2023 and $668 million in 2022.
Needham analyst Laura Martin recently upped her price target on Reddit stock to 190, from 120. Further, the analyst kept Reddit as a "conviction list" name.
"From our point of view, key areas driving Reddit's growth in 2025 include higher Reddit search and shopping revenues, and higher international revenues from closing the (average revenue per user) gap vs. U.S. users," Martin wrote in a Dec. 11 client note. "From a macro perspective, we expect markets and ad demand to be stronger in 2025 vs. 2024, driven by more positive business sentiment."
Meanwhile, Baird analyst Colin Sebastian is neutral on Reddit stock but said in a client note earlier this month that he sees "near-term upside" to his expectations for Reddit.
"While Reddit still falls within 'experimental' ad budgets, our checks suggest a high level of interest among advertisers, which we think the company can unlock with platform improvements including automation, targeting, search and shopping ads that tap into the vast supply of conversation pages/subreddits," Sebastian wrote.
Reddit Search Push
Another factor to watch for Reddit next year is its reliance on Google search for attracting users. Reddit Chief Executive Steve Huffman said on a late October analyst call that "Reddit" was on track to be the sixth most Googled term of 2024. But Huffman acknowledged on the same call that Google and its algorithms can "giveth and taketh away."
Reddit earlier this month previewed a forthcoming AI-powered feature called Reddit Answers it hopes will help people take their search queries directly to Reddit.
However, Bernstein analyst Mark Shmulik wrote recently that Reddit's "investments in search and ad tech should offer less upside to margins going forward." Shmulik rates Reddit underperform.
"The (second half 2024) test has been passed, but an expensive stock has investors skipping a grade ahead of us," Shmulik wrote on Dec. 18.
Reddit Stock: 97 IBD Composite Rating
On the stock market today, Reddit stock lost 1.8% to close at 173.52. That marked a second consecutive trading day with a loss, but Reddit stock remains above its 21-day moving average.
Meanwhile, Reddit stock gapped up a massive 42% on Oct. 30, after the company's third-quarter earnings report. Reddit has a best-possible IBD Relative Strength Rating of 99.
Reddit's IBD Composite Rating is 96 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.
