Reddit (RDDT) will report earnings later today, putting the social media stock's huge post-IPO rally to the test. Shares of the online forum operator have gained more than 300% in its nearly 11 months as a public company.
On the stock market today, Reddit is up more than 2% at 219.55 in recent action. Shares have gained 34% so far this year.
↑ X NOW PLAYING These Hot Software Stocks Have Earnings Due. Here's What To Watch.Reddit's rally has been powered by strong advertising sales growth and moves to boost revenue through data licensing agreements with AI developers OpenAI and Google. On Tuesday, Reddit announced a partnership Intercontinental Exchange (ICE) that will allow the New York Stock Exchange operator to tap Reddit's data for analytics tools for the finance industry.
Expectations are high ahead of the report, with analysts projecting San Francisco-based Reddit will build off a Q3 that was its first profitable quarter as a public company. Here are the numbers to watch. (Note: This article will be updated with Reddit's results.)
Wall Street expects earnings of 25 cents per share and sales of $405 million, according to FactSet. That would represent 62% revenue growth, a slight deceleration from the 68% rate in the third quarter.
But some analysts bullish on Reddit believe the company can accelerate its adverting sales from the 56% rate posted in the previous quarter.
"Strong ad checks support a potential 5th straight acceleration in advertising revenue, driven by faster growth in performance products and small/mid-sized customers," wrote Jefferies analyst John Colantuoni in a recent client note. "We expect ARPU (average revenue per user) to remain the key driver of faster growth, underscoring Reddit's nascent opportunity to close the monetization gap to peers Pinterest/Snap."
Colantuoni rates Reddit stock a buy.
Meanwhile, Reddit typically provides guidance for its current-quarter revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). Analysts are looking for Q1 revenue guidance of roughly $358 million and adjusted EBITDA near $73 million, according to FactSet.
Another factor to watch is Reddit's user growth. Analysts project that daily active users on the forum website will reach 103 million, up 40% year over year.
Meanwhile, Reddit stock has a stellar IBD Composite Rating of 98 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Reddit stock is also on the premier IBD 50 list, as well as IBD's IPO Leaders and Tech Leaders lists.
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