Should You Buy, Sell, or Hold Reddit Stock Before Q4 Earnings Release?

Core Insights - Reddit (RDDT) is expected to report fourth-quarter 2025 results on February 5, 2026, with projected revenues between $655 million and $665 million, indicating a year-over-year growth of 53% to 55% [1][9] - The Zacks Consensus Estimate for revenues stands at $667.58 million, reflecting a year-over-year growth of 56.06% [2] - Earnings per share are estimated at 96 cents, showing a year-over-year growth of 166.67% despite a slight decline in the consensus over the past month [2] Revenue Growth Factors - Increased advertising sales and growing AI initiatives are expected to positively influence Reddit's fourth-quarter performance [3] - Innovations in ad products, automation, and tools like Reddit Insights are anticipated to enhance advertiser performance and attract more advertisers [3][9] - The integration of Reddit Answers into core search functionality is expected to boost ad revenues, with over 75 million weekly searches on Reddit in Q3 2025 [4] International Expansion - Reddit's international growth strategy includes machine translation in 30 languages and localized content frameworks, aimed at enhancing user engagement in markets like India, Brazil, Germany, and France [5] Competitive Landscape - Reddit faces stiff competition from companies like Snap, Meta Platforms, and Pinterest, all of which are expanding their advertising capabilities in the digital ad market [14] - Snap reported a 5% year-over-year increase in advertising revenues, while Meta's advertising revenues grew by 24.3% year-over-year [15][16] - Pinterest is expanding its advertising portfolio through acquisitions, such as the recent agreement to acquire tvScientific [18] Stock Performance and Valuation - RDDT shares have declined by 12.2% over the past six months, underperforming the Zacks Computer & Technology sector, which returned 14.6% [7] - The current valuation of RDDT is considered stretched, with a forward Price/Sales ratio of 10.81X compared to the industry average of 4.32X [11] Conclusion - Reddit's prospects are bolstered by an expanding advertising business and improved user experience, but challenges include a difficult macroeconomic environment, elevated tariffs, and intense competition [19]