Reddit’s shares surged over 7% to a new high on Tuesday following Raymond James analysts’ decision to raise their price target and maintain a “strong buy” rating for the social media platform. The stock hit $191 in midday trading, surpassing its previous peak of $182 on Jan. 6. Reddit’s shares first crossed the $100 mark in late October after the company exceeded Wall Street’s expectations with its third-quarter financial results.
In a note on Tuesday, Raymond James analysts announced an increase in Reddit’s price target from $150 to $200, citing their confidence in the platform’s potential for international expansion. Reddit aims to attract more users beyond its primary U.S. market to grow its advertising business, as stated by Reddit’s Chief Operating Officer Jen Wong in an interview with CNBC. The company’s third-quarter sales, primarily from online advertising, climbed 68% year-over-year to $348.4 million.
Raymond James analysts highlighted Reddit’s use of artificial intelligence to translate its content into various languages as a strategy to enhance local search rankings and drive sustainable growth. Wong emphasized the importance of AI translation in Reddit’s global expansion plans, noting significant user growth in regions like the U.K., the Philippines, India, and Brazil.
The analysts also pointed out that Reddit remains among the top five most searched websites, leveraging its authentic and well-moderated content to maintain visibility in search results. They emphasized that Reddit’s revenue is higher from logged-in users compared to logged-out visitors, who have increased due to site enhancements and Google’s algorithm favoring genuine content.
In a section on potential risks, the analysts cautioned about the impact of unfavorable Google search algorithm updates on Reddit’s search rankings and conversion rates of logged-out users to logged-in accounts. The analysts also mentioned former Treasury Secretary Steven Mnuchin’s interest in investing in TikTok in a related video.
