Core Viewpoint - Reddit is expected to report its fourth-quarter 2024 results on February 12, with anticipated revenues between $385 million and $400 million, while the Zacks Consensus Estimate stands at $408.01 million [1][2]. Revenue and Earnings Estimates - The consensus estimate for earnings is 24 cents per share, which has increased by one cent in the past 30 days [2]. Factors Influencing Performance - Increased ad sales and growing AI initiatives are expected to positively influence Reddit's fourth-quarter performance [3]. - The advertising business is experiencing strong growth across various objectives, channels, verticals, and geographies, with solid growth anticipated from mid-market and SMB customers [4]. AI and Advertising Innovations - Reddit's AI-driven tools, such as auto bidding and expanded ad offerings, have enhanced ad performance and contributed to growth in the fourth quarter [5]. - New features like Reddit Pro tools are designed to help businesses reach their audience more effectively, which is expected to increase user engagement [6]. Ad Solutions and Sector Performance - The company is refining its ad solutions, particularly in the middle and lower funnel, which has seen strong performance and increased adoption by advertisers, driving revenue growth from sectors like auto, consumer goods, financial services, and pharmaceuticals [7]. - Reddit's international user base is expanding, particularly in regions like France, India, and the Philippines, aided by machine translation efforts [8]. Stock Performance - RDDT shares have appreciated 329.9% over the trailing six-month period, significantly outperforming the Zacks Computer & Technology sector's return of 13.6% and the Zacks Internet - Software industry's 38.6% rally [9][10]. Competitive Positioning - Reddit has outperformed its peer, Meta Platforms, which gained 38.5% over the same period, although RDDT's valuation is considered stretched with a forward Price/Sales ratio of 21.65X compared to the industry's 3.31X [11]. Partnerships and User Engagement - Partnerships with companies like Alphabet enhance content discovery and community engagement, benefiting both Reddit and its partners [13]. - The testing of "Reddit Answers," an AI-powered chatbot, is expected to significantly enhance user engagement and retention [14][15]. - Collaboration with Integral Ad Science strengthens Reddit's advertising position by providing trusted transparency and advanced measurement tools [16]. Growth Prospects and Market Conditions - Reddit's strong portfolio and expanding partner base indicate promising long-term growth prospects, reflected in its Growth Score of A [19]. - The company is monitoring potential impacts from upcoming elections and macroeconomic uncertainties that may affect ad revenue and user engagement [20].
Reddit Stock Before Q4 Earnings: A Smart Buy or Risky Investment?