Investing.com

Needham has raised its price target for Reddit Inc (NYSE:RDDT) to $190 from $120, citing strong growth in user numbers and average revenue per user. Meanwhile, Wells Fargo (NYSE:WFC) initiated coverage on the stock with an “overweight” rating and a target price of $206.

> “Post-3Q EPS share outperformance reflects optimism post a strong print and guide. We see upside on ad monetization and believe shares are likely to outperform with continued positive revisions,” stated the Wells Fargo analyst.

Needham also increased its revenue and profit forecasts for the fourth quarter of 2024, as well as for fiscal years 2025 and 2026, reflecting Reddit’s momentum in the digital advertising and international markets.

> “We raise our price target on Reddit due to the stronger financial momentum we expect over the next 24 months. Reddit remains our Conviction List name,” commented the Needham analyst.

Reddit's large and engaged user base, boasting over 100,000 active subreddits, offers valuable opportunities for targeted advertising. Recent trends in user growth have been accelerating for five consecutive quarters, indicating a healthy ecosystem capable of attracting advertisers.

Reddit is strategizing to close the revenue gap between its international and U.S. users, which is anticipated to bolster revenue growth in 2025.

Needham foresees improved macroeconomic conditions and stronger ad demand in 2025 as business sentiment turns more positive.

Reddit’s fixed-cost business model is positioned to leverage increasing revenues from user growth. Institutional investors expect Reddit to significantly boost its EBITDA margins from 16% in 2024 to over 40% by 2030. Needham acknowledged that their estimates might be conservative in light of these expectations.