BofA Issues New Price Target on Reddit Stock Following $750 Million IPO
With Reddit reporting earnings on May 7th, BofA sees an opportunity for upside compared to Wall Street estimates.
Reddit (NYSE: RDDT) went public in a much-anticipated initial public offering (IPO) on March 21, 2024.
The social media company priced its shares at $34 per share, the top of its expected range. This valued Reddit at roughly $6.5 billion, though it fell short of its $10 billion valuation in 2021.
Despite this, the IPO was seen as a success, with Reddit raising around $750 million and its stock price surging on its debut day. This strong performance was seen as a positive sign for the industry.
Over the last month, Reddit shares have risen just over 5%. They are currently trading at above $48 per share after dropping to a low of $37.35 in April.
In a note to clients this week, analysts at Bank of America raised the price target for Reddit to $50 from $45 per share, maintaining the rating at Neutral.
With Reddit reporting earnings on May 7, BofA sees an opportunity for upside compared to Wall Street estimates, with the bank stating:
“We expect upside to our revenue est. at $212mn (up 29% y/y), in line with Street. Our est. has ad revenues of $199mn, up 21% y/y, a 4pts q/q deceleration on 1pt easier y/y comp. With Snap 1Q ad rev. accelerating 14pts (on 9pt easier comp) & Pinterest (NYSE: PINS) 11pts q/q (on 1pt tougher comp), we expect upside.”
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Furthermore, the firm estimates $13 million in 1Q data licensing revenue, primarily from the company’s new Alphabet (NASDAQ: GOOGL) deal. For users, they forecast 77 million daily active users (DAUs), up 28% year-on-year and accelerating 1pt quarter-on-quarter.
BofA also noted:
“Sensor Tower data suggests Reddit mobile DAUs increased 20% y/y in 1Q, a 7pt acceleration from 13% in 4Q as Reddit’s relevancy & speed initiatives are driving increased activity.”
According to BofA, the most important drivers of post-call stock performance will be the second-quarter revenue and the platform’s user outlook. Nevertheless, they expect a positive tone on user trends and ad platform progress. However, they note the risk of high expectations given peer results.
Shares of Reddit last traded at $48.92, up +1.28% on the day. Since its IPO on March 21, RDDT stock is down -2.52%.
This article was originally published on Investing.com.
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