Needham raises Reddit price target on strong growth By Investing.com

Investing.com — Needham raised its price target for Reddit Inc (NYSE:) to $190 from $120, citing strong growth in user numbers and average revenue per user. While Wells Fargo (NYSE:) started the stock with “over- weight” with a target price of $206.

“Post-3Q EPS share outperformance reflects optimism post a strong print and guide, we see upside on ad monetization upside and believe shares are likely to outperform on continued positive revisions,” Wells Fargo analyst wrote.

Needham also raised its revenue and profit estimates for the fourth quarter of 2024, as well as for fiscal years 2025 and 2026, reflecting Reddit’s momentum in the digital advertising and international markets.

“We raise our price target on Reddit owing to the stronger financial momentum we now expect over the next 24 months. Reddit remains our Conviction List name,” Needham analyst wrote.

Reddit’s large and engaged user bases, over 100,000 active subreddits, provides valuable opportunities for targeted advertising. Recent user growth trends, accelerating over five consecutive quarters, point to a healthy ecosystem that can attract advertisers.

Reddit is working to close the revenue gap between international and U.S. users, which is expected to contribute to revenue growth in 2025.

Needham anticipates improved macroeconomic conditions and stronger ad demand in 2025 as business sentiment becomes more positive.

Reddit’s fixed-cost business model is positioned to benefit from operating leverage as user growth drives higher revenues. Institutional investors expect Reddit to significantly expand its EBITDA margins from 16% in 2024 to more than 40% by 2030. Needham acknowledged that its estimates may be conservative compared to these expectations.