Reddit Surges 85% in a Year: Is the Stock Still Worth Buying?

Core Insights - Reddit (RDDT) shares have surged 85.1% over the past 12 months, significantly outperforming the broader Zacks Computer & Technology sector's return of 9.8% and the Zacks Internet - Software industry's rise of 19.4% [1][4] - The company's strong performance is attributed to robust user growth, improved advertising performance, and significant investments in AI-driven tools [2][5] User Growth and Advertising Performance - Reddit's advertising business grew 60% year over year to $395 million in Q4 2024, driven by higher impressions and more efficient ad placements [5] - Daily active users reached 101.7 million, marking a 39% year-over-year increase, with international users growing by 46% and logged-in users by 27% [7] New Tools and Features - In March 2025, Reddit introduced new tools to enhance user engagement, including post checks to prevent rule violations and post recovery features [9][10] - These updates aim to simplify posting and improve community engagement, allowing users to track post performance [10] AI-Driven Partnerships - Reddit has formed partnerships to create data and analytics products, notably with Intercontinental Exchange (ICE), leveraging its extensive data for financial industry applications [12][11] Earnings Estimates - For Q1 2025, Reddit expects revenues between$ 360 million and $370 million, with a Zacks Consensus Estimate of$ 374.53 million, indicating a year-over-year growth of 54.15% [13] Valuation and Growth Prospects - Reddit's stock is currently trading at a premium, with a forward Price/Sales ratio of 11.58, higher than its median of 9.62 and the industry's 5.22 [14][17] - The company aims to drive growth by expanding its advertising business and enhancing user experience, justifying its premium valuation [17]