Reddit Wows Retailers With Surprise Q3 Profit, Stock Poised To Break Above $100 For First Time

Social-media platform Reddit, Inc.’s ($RDDT) stock skyrocketed after the company reported a surprise profit for its third quarter.

San Francisco, California-based Reddit reported third-quarter earnings per share (EPS) of $0.16, reversing from a loss of $0.13 per share a year ago. Analysts, on average, expected the company to report a loss of $0.07 per share for the quarter, according to Yahoo Finance.

Revenue climbed 68% year-over-year (YoY) to $348.4 million, with ad revenue, which accounted for 90.4% of the total, rising 56%. Gross margin expanded 280 basis points to 90.1%.

For the fourth quarter, the company expects revenue of $385 million to $400 million and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $110 million to $125 million. The revenue guidance stands sharply above the consensus estimate of $317.5 million.

Following the quarterly results, a slew of Wall Street firms raised their price targets for Reddit stock, according to the Fly. BofA hiked the price target from $84 to $99, Citi from $70 to $120, Bernstein from $65 to $85 and JMP Securities from $84 to $118.
 

BofA, though turning increasingly positive on the stock, maintained its ‘Neutral’ rating, citing the premium valuation of the shares, which presents limited scope for upside despite another quarter of strong execution. 

Citi called Reddit’s third-quarter results “impressive.” The firm lauded the company for its continued user growth and engagement gains, with daily active users rising 47% YoY to 97 million. 

Reddit was named an AI winner by Bernstein, which said the company grew ad revenue at an “unprecedented” clip.

On Stocktwits, retail sentiment toward Reddit stock improved from “neutral” to “bullish,” with “high” message volume. 

Some retailers began highlighting the stock as another “long-term hold.”

Others, apparently, were caught unawares by the surprise profit.

In premarket trading, as of 7:40 am ET, Reddit jumped 20.17% to $98.23. If the gain holds good in the regular session, the stock is poised to break above the $100 psychological resistance and trade in record territory.

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