Key Stats for Reddit Stock
- Pre-market price change for Reddit stock: 4.6%
- $RDDT Share Price as of Feb. 5: $151
- 52-Week High: $283
- $RDDT Stock Price Target: $252
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What Happened?
Reddit (RDDT) stock surged 5% after the company crushed earnings expectations and announced a $1 billion share buyback program.
The social media platform posted revenue of $726 million, easily beating the $667 million analysts expected, while earnings came in at $1.68 per share versus the $1.45 per share forecast.
The strong results show Reddit is successfully converting its massive user base into serious advertising revenue.
- Fourth-quarter revenue jumped 70% year-over-year, while net income soared 255% to $252 million. That’s impressive growth for a company that only went public in March 2024.
- Reddit’s daily active users grew 19% to 121.4 million, slightly ahead of Wall Street’s expectations.
- But there’s a catch: U.S. logged-in user growth slowed to just 5%, marking the sixth straight quarter of deceleration in this key metric.
- Logged-in users are more valuable to advertisers because they engage more frequently with the platform.
CEO Steve Huffman addressed this concern head-on, announcing that Reddit will discontinue the logged-in versus logged-out user split later this year.
Why? Because the company’s new features—like instant personalization—are blurring the lines between the two groups. “
As the industry evolves, how we think about our product and users must evolve too,” Huffman wrote in the investor letter.
Reddit also gave strong guidance for the first quarter. The company expects revenue between $595 million and $605 million, well above the $577 million analysts projected.
The $1 billion buyback announcement is a big deal for a newly public company. CFO Drew Vollero said Reddit can now afford to invest in growth, pursue acquisitions, and buy back shares—all while keeping over $1 billion in cash on the balance sheet.
With $2.5 billion in cash and just under $10 million in annual capital expenses, Reddit is generating serious free cash flow.
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What the Market Is Telling Us About Reddit Stock
The positive reaction to Reddit’s stock suggests investors are focused on the company’s strong revenue growth and profitability rather than on concerns about slowing logged-in user growth.
The 70% revenue growth marks Reddit’s sixth consecutive quarter of 60%+ growth, showing the business model is working at scale.
Investors also seem to appreciate the share buyback program, which signals management’s confidence in the business.
For a company that went public less than two years ago, announcing a billion-dollar buyback is a bold statement that Reddit believes its stock is undervalued.
The shift away from reporting logged-in versus logged-out users is notable. Some investors may see this as Reddit trying to hide a weakness, but the company argues the distinction no longer matters as its product evolves.
Wall Street will be watching closely to see whether total user engagement metrics remain strong even as logged-in growth slows.
Reddit’s data licensing deals with Google and OpenAI continue to gain traction. Huffman said relationships with both companies are “very healthy” and evolving from pure business deals into product partnerships.
With Reddit becoming the most-cited source in AI-generated answers, the platform is positioning itself as essential infrastructure for the AI era.
For now, Reddit stock is riding high on stellar earnings and a cash-rich balance sheet. If the company can maintain its 60%+ revenue growth while converting more users into logged-in accounts (or proving that distinction doesn’t matter), the stock could have more room to run.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
