Reddit Stock Jumps 40% on Surprise Profit, Buoyant Outlook

Key Takeaways

• Reddit shares are surging Wednesday after the social media firm posted its first quarterly profit as a public company.
• Reddit posted third-quarter revenue of $348.4 million, up 68% from the same period last year and beating Visible Alpha estimates. It reported a third-quarter net profit of $29.9 million, or 16 cents per share, versus estimates of a net loss of $17.7 million, or 10 cents per share.
• For the fourth quarter, Reddit is forecasting revenue in the range of $385 million to $400 million.

Reddit (RDDT) shares are surging Wednesday after the social media firm posted its first quarterly profit as a public company with higher-than-estimated results and a rosy fourth-quarter outlook.

Reddit, which went public on the New York Stock Exchange (NYSE) in March, posted third-quarter revenue of $348.4 million, up 68% from a year ago and surpassing the $312.2 million expected by analysts polled by Visible Alpha. It reported a third-quarter net profit of $29.9 million, or 16 cents per share, versus estimates of a net loss of $17.7 million, or 10 cents per share.

For the fourth quarter, Reddit is forecasting revenue in the range of $385 million to $400 million and adjusted EBITDA of $110 million to $125 million.

The news sent the stock up more than 40% in recent trading. The shares have more than doubled since they began trading and, at levels near $115, are well above their $34 IPO price.

“It was another strong quarter for Reddit and our communities as we achieved important milestones, including new levels of user traffic, revenue growth, and profitability,” Chief Executive Officer (CEO) Steve Huffman said.

Citi Notes Revenue Surge Due To Ad Growth

Citigroup analysts, who have a “buy” rating on the stock, noted that advertising revenue growth of 56% drove the higher-than-estimated sales jump.

“Advertising revenue was driven by growth in impressions delivered from higher growth users, more efficient ad load, and expansion of conversation placement ads,” Citi said.

JPMorgan analysts raised their price target on the stock to $110 from $77, although they maintained a “neutral” rating.