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Reddit Stock Dominated 2024—Why the Rally Isn’t Over Yet

Kazan, Russia - Nov 03, 2021: The icon of the Reddit discussion platform application among other applications on the smartphone screen. On the background is the Reddit logo. — Stock Editorial Photography

Key Points

  • Reddit stock dominated the technology sector during 2024. However, there are plenty of points and factors that could push it higher in 2025.
  • The company's KPIs are firing on all cylinders, and new monetization routes could push for more expansion in financials.
  • Wall Street analysts and institutional capital are now expressing their bullish outlooks on Reddit stock in the future.
  • 5 stocks we like better than Reddit.

When it comes to the hottest trends in the stock market for 2024, it isn’t likely that investors would land on social media names, or at least not for the reasons that social media platforms should be considered. Sure, stocks like Alphabet Inc. NASDAQ: GOOGL and Meta Platforms Inc. NASDAQ: META saw some bullish price action during 2024, especially toward the end; however, it was likely because of their artificial intelligence exposure.

Reddit Today

Reddit, Inc. stock logo
RDDTRDDT 90-day performance
Reddit
$173.54 -3.20 (-1.81%)
(As of 05:45 PM ET)
52-Week Range
$37.35
$182.20
Price Target
$132.70

However, the technology sector is not limited to artificial intelligence. Even though its attention has been focused on these trends, there is an underrated name that has absolutely dominated the industry and is actually just as exposed to artificial intelligence as all these other names. Shares of Reddit Inc. NYSE: RDDT have gone on a massive 194.3% rally over the past 12 months alone, but there is enough evidence to safely assume that the stock’s run isn’t over yet.

After looking at the company’s key performance indicators (KPIs), investors can see from the beginning how this stock, despite its aggressive rally over the year, still could have a long way to go until its future growth is priced today. It shouldn’t come as a surprise to see Wall Street analysts also be willing to express their bullish views on the stock recently.

All KPIs for Reddit Stock Running are Running Hot

As of Reddit’s latest quarterly earnings results, investors can see a couple of KPIs that definitely stand out from the rest of the pack and its peers. Revenue for the quarter reached $348.4 million, an increase of 68% over the past 12 months. It is worth mentioning that this revenue carries with it a 90.1% gross margin due to the business model.

That means management has more capital available to effectively invest back into the business and further monetization routes, which have, in fact, been implemented recently into Reddit’s avenues of monetization. Before investors learn more about these monetization measures, they should know about Reddit's most important financial metric.

It comes through the company’s free cash flow (operating cash flow minus capital expenditures). This metric reached up to $71.6 million this quarter, up massively from last year’s net cash outflow. That shift means that management – and the business as a whole – is going in the right direction, and there are reasons to believe this theme won’t stop soon.

Driving this growth is the daily active user growth to 97.2 million as of the latest quarter, an aggressive jump of 47% over the past 12 months. Now, the average revenue per user has reached $3.58, which is up by 14% in the year as well. These double-digit growth rates across the board are undoubtedly bullish for Reddit; however, earning the big payoffs comes through figuring out the next steps.

Reddit, Inc. (RDDT) Price Chart for Friday, December, 27, 2024

Reddit’s New Monetization Model

Reddit realized what Elon Musk did when he bought the platform formerly known as Twitter. The more data that comes into the platform through words and images, the more data can be used to train artificial intelligence models that rely on these inputs. This data is just the type of raw materials that the bigger names need.

That is why Meta and Google have entered into agreements with Reddit to pay for access to their data so that the brand can monetize their users and the content these users create seamlessly. The proposal here is that, as Google and its keyword offer rely on training large language models through data from Reddit, a new massive wave is created.

How? Reddit’s user growth is still pushing double-digit growth rates, and as most investors know, the more users come onto the platform, the more data is produced and available for monetization from the bigger names.

Reddit Stock Forecast Today

12-Month Stock Price Forecast:
$132.70
-23.53% Downside
Moderate Buy
Based on 21 Analyst Ratings
High Forecast$210.00
Average Forecast$132.70
Low Forecast$54.00
Reddit Stock Forecast Details

Knowing this, some on Wall Street decided to take the initiative and start reflecting on this profit route through ratings and valuations. Particularly those at Citigroup and Guggenheim, both of which see a Buy rating for Reddit stock as of December 2024.

Valuations from Citigroup and Guggenheim today look more like a $200 and $210 price target, respectively. To prove these new views, investors face a potential rally of anywhere between 18.6% and 24.5% from where the stock trades today.

More than that, institutional buyers from FMR LLC decided to boost their holdings in Reddit stock by as much as 302.8% as of November 2024, bringing their net position to a high of $801.4 million today, or 6.9% ownership in the company, which should be taken as another bullish factor for investors to consider when coming up with their potential buy theses.

Should you invest $1,000 in Reddit right now?

Before you consider Reddit, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Reddit wasn't on the list.

While Reddit currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Gabriel Osorio-Mazilli
About The Author

Gabriel Osorio-Mazilli

Contributing Author

Value Stocks, Asian Markets, Macro Economics

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Alphabet (GOOGL)
3.5123 of 5 stars
$192.76-1.5%0.42%25.57Moderate Buy$206.69
Meta Platforms (META)
3.8506 of 5 stars
$599.81-0.6%0.33%28.25Moderate Buy$638.00
Reddit (RDDT)
1.0108 of 5 stars
$173.54-1.8%N/AN/AModerate Buy$132.70
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