Reddit (RDDT) stock is falling Thursday after the social media platform beat revenue and earnings expectations but fell short of analysts' forecasts for users during its fourth quarter.
In the three months ending December 31, Reddit's revenue increased 71.2% year over year to $427.7 million, boosted by a 39.1% increase in daily active uniques to an all-time high 101.7 million and a 23.1% increase in average revenue per unique to $4.21. Earnings per share (EPS) rose to 36 cents from breakeven in the year-ago period.
"It was another strong quarter as we accomplished exciting milestones across revenue and international growth," said Reddit CEO Steve Huffman in a statement. "However, what's most exciting is still ahead. We're focused on providing a best-in-class experience for finding community and trusted information, proving that Reddit is for everyone, everywhere."
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The headline results beat analysts' expectations. Wall Street was anticipating revenue of $405 million and earnings of 25 cents per share, according to CNBC.
However, users were expected to come in at 103.1 million. In his Q4 Letter to Shareholders, Huffman explained that the user numbers were affected by an algorithm change at Google.
"Later in Q4, we experienced some volatility with Google Search triggered by a periodic algorithm change, but traffic from search has recovered so far in Q1, and we've regained momentum," he said.
The CEO added that "referrals from search fluctuate from time to time" and that Reddit has "navigated numerous algorithm updates" in the past and "did an excellent job adapting to these latest changes effectively."
For its first quarter, Reddit said it expects to achieve revenue of $360 million to $370 million, ahead of analysts' expectations of $358 million.
Is Reddit stock a buy, sell or hold?
Reddit stock has been tearing up the price charts since it went public in March, rising about 330% even accounting for the decline of more than 6% on Thursday. That makes RDDT a pretty successful initial public offering so far. And Wall Street remains upbeat on the social media stock.
According to S&P Global Market Intelligence, the consensus recommendation among analysts it tracks is a Buy.
However, analysts' price targets have not been able to keep up with the surging stock price. The average price target currently stands at $198.05, representing a slight discount to current levels.
Financial services firm Needham maintained its Buy rating and raised its price target on RDDT stock to $220 from $190 following the earnings beat.
"From an earnings and valuation point of view, we are most optimistic about RDDT's upside from licensing its data to train GenAI Large Language Models (LLMs)," says Needham analyst Laura Martin, CFA, in a note this morning.
Martin says Reddit "is the best source of this type of daily information for LLMs," citing a content library of "1 billion posts and 16 billion comments collected over the past 18 years." Martin adds that Reddit's platform "hosts 1.2 million new posts and 7.5 million new comments every day."
Related Content
-
Gen X Turns 60: It's Time to Remix Your Retirement PlaylistIf you want a worry-free retirement, you can't keep playing the same old song. You need to freshen up your financial strategies, as well as your music.
-
I'm a Financial Adviser: Here's How a Three-Part Retirement 'Crash Plan' Can Prepare You for Market TurbulenceHaving a plan ready to go when markets get wild — covering how you'll handle income, rebalancing and taxes — can be the ultimate retirement secret weapon.
-
Investors Buy the Nasdaq's Big Dip: Stock Market TodayStocks are up and down again to end an up-and-down week ahead of big earnings announcements and the eventual return of regular economic data flow.
-
Here's How to Plan This Year's Roth Conversion, From a Wealth ManagerWhile time is running out to make Roth conversions before the end of the taxable year, consider taking your time and developing a long-term strategy.
-
Four Times You Need a Second Opinion on Your Financial PlanIs your financial plan fit for purpose — or is your adviser peddling an outdated strategy? When you see these red flags, it's time for a second opinion.Evan
-
'But It's Not My Fault!': Your Insurance Company Absolutely Will Blame You in These Five ScenariosInsurance companies care about 'fault' in more ways than you think — from payment mishaps to your neighbor's landscaping — so it's on you to manage the risks.
-
Dow Dives 797 Points as Government Opens: Stock Market TodayThe process of pricing and re-pricing realities old and new never stops, and next week promises to be at least as exciting as this week.
-
5 Core Stocks Every Investor Should Own In 2026 and BeyondCore stocks are solid, long-term investments that provide stable returns and steady growth within your portfolio. Here are five we like.
