Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 2 May, 25 | RDDT | Buy | USD 118.79 | USD 125.0 | USD 135.0 | 3 days | 13.6% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Profitability Improvement: The company achieved a net income of $26.2 million, a significant improvement compared to the net loss of $(575.1) million in the same period last year
Revenue Growth: Reddit experienced a robust 61% year-over-year growth in total revenue, reaching $392.4 million
Share Dilution Risk: Although Reddit’s fully diluted shares outstanding decreased by 0.1%, there is still potential for further dilution in the future, which could negatively impact per-share earnings
High Dependency on Ad Revenue: While ad revenue grew by 61%, it still constitutes the bulk of Reddit's revenue, making it vulnerable to fluctuations in advertising spending
Reddit faces significant risks related to its reliance on advertising revenue, which could be impacted by changing market conditions and advertising budgets
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 118.79 | 100.0 | 125.0 | 135.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Growth in User Engagement and Revenue
Reddit, Inc. reported substantial growth in the first quarter of 2025, with Daily Active Uniques (DAUq) increasing by 31% year-over-year to 108.1 million. This surge in user engagement helped propel total revenue to $392.4 million, marking a 61% year-over-year increase. The company also saw impressive growth across its key revenue segments, with ad revenue rising by 61% to $358.6 million and other revenue increasing by 66% to $33.7 million.
Improvement in Profitability
Reddit’s gross margin for Q1 2025 expanded by 190 basis points year-over-year to reach 90.5%. This increase in margin reflects the company's continued ability to scale its operations efficiently. Additionally, Reddit achieved net income of $26.2 million, a notable turnaround from a net loss of $(575.1) million in the same period last year, representing a 236.7% improvement in net margin.
Adjusted EBITDA and Cash Flow Performance
Reddit's adjusted EBITDA for Q1 2025 stood at $115.3 million, up significantly from $10.0 million in Q1 2024, resulting in an adjusted EBITDA margin of 29.4%. The company's operating cash flow also experienced a strong uptick, growing by 295% to reach $127.6 million, reflecting its strong cash-generating capabilities. Free cash flow increased to $126.6 million, supported by minimal capital expenditures of just $1.0 million.
EPS and Shareholder Returns
Reddit’s basic and diluted earnings per share (EPS) for Q1 2025 were $0.14 and $0.13, respectively. The total number of fully diluted shares outstanding decreased slightly to 206.0 million, a 0.1% reduction from the previous quarter. This reduction in shares, coupled with the positive EPS figures, suggests improved shareholder returns.
International Revenue Growth
The company also made notable progress in international markets. Reddit’s international revenue grew by 82% year-over-year, reaching $78.5 million in Q1 2025. This impressive growth highlights Reddit’s expanding global footprint and the increasing appeal of its platform beyond the U.S.
Financial Outlook for Q2 2025
Looking ahead, Reddit has provided its financial guidance for the second quarter of 2025. The company estimates revenue to be in the range of $410 million to $430 million and expects adjusted EBITDA to range between $110 million and $130 million. While these estimates reflect optimism, they are subject to various risks and uncertainties that could impact performance.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Reddit, Inc (NYSE: RDDT) at the closing market price of USD 118.79, as on May 01, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Industry:
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) |
|---|---|---|---|---|---|---|
| RDDT Reddit, Inc. |
-9.482 8.98% | 96.16 | - | - | - | - |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is May 01,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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