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Reddit Surges 50% in a Month: Is the Stock Still Worth Buying?
RedditReddit(US:RDDT) ZACKSยท2025-08-21 15:55

Core Insights - Reddit shares have surged 49.6% in the past month, outperforming the broader Zacks Computer & Technology sector and the Zacks Internet - Software industry [1] - The company reported second-quarter 2025 earnings of 45 cents per share, beating estimates by 25 cents, with revenues of $499.63 million, surpassing estimates by 16.9% and increasing 77.9% year over year [2] - For Q3 2025, Reddit expects revenues between $535 million and $545 million, indicating a year-over-year growth of 54-56% [3] Financial Performance - Reddit's advertising revenues surged 84% year over year to $465 million in Q2 2025, driven by strong demand for direct-response formats [11] - The Zacks Consensus Estimate for Q3 advertising revenues is pegged at $438.3 million, reflecting continued growth in this segment [11] - The consensus estimate for Q3 2025 earnings is 49 cents per share, a significant increase from the previous year's EPS of 16 cents [3] User Engagement and Growth - Reddit's AI tools, such as Reddit Answers and translation features, are enhancing user engagement globally, with Reddit Answers reaching 6 million weekly users [8][13] - International Daily Active Uniques (DAUq) grew 32% year over year, indicating strong global adoption, with a consensus mark for Q3 DAUq at 113.17 million [13] - Focus markets like France, Spain, and Brazil contributed significantly to international growth and are expected to remain key drivers [14] Strategic Developments - Reddit's advertising platform has expanded to include performance marketing solutions, attracting more sophisticated marketers [10] - The company is leveraging its unique content for data licensing, with Q3 consensus for other revenues, including data licensing, at $34.6 million [14] - The platform's ability to scale authentic content through AI-driven features positions it for sustained revenue expansion [19] Valuation - Reddit shares are trading at a premium with a forward 12-month P/S ratio of 16.5X compared to the Zacks Internet - Software industry's 5.58X [16] - The company holds a Zacks Rank 1 (Strong Buy) and a Growth Score of B, indicating a strong investment opportunity [20]