Core Insights - Reddit stock has experienced volatility, with a 12% decline this month despite recent analyst optimism regarding upcoming earnings and product developments [1][2][4] - Analyst Youssef Squali from Truist expects a strong Q3 earnings report, with results anticipated at the high end of expectations, and has raised the price target for Reddit stock from 225 to 260 [2][4] - The introduction of a unified search function and a generative AI-powered Answers feature is expected to enhance user engagement and drive growth in Reddit's advertising business [3][4] Financial Performance - Reddit stock has surged nearly 500% since its IPO in March 2024, but has seen a nearly 30% pullback from its record high of 282.95 on September 18 [5] - The stock's Relative Strength Rating remains strong at 97 out of a possible 99, indicating significant outperformance over the past year [7] User Engagement and Growth Potential - Reddit's core search product attracts 70 million weekly users, while the new AI-powered Answers feature has 6 million weekly active users, showing rapid growth potential [3] - Squali believes that Reddit's ability to leverage authentic human conversations will differentiate it in the search engine market, potentially driving new growth for its ad business [3][4] Market Dynamics - Concerns arose regarding a decrease in traffic from AI chatbots, particularly ChatGPT, but analysts, including Squali, argue that Reddit's citation rates in Google's AI overviews remain stable, suggesting continued traffic stability [6][7] - Google holds over 90% market share in search referral traffic, and Reddit is believed to generate most of its search referral traffic from Google [7]