Reddit (RDDT) stock pops on strong advertising and user growth
Reddit CEO Steve Huffman stands at the New York Stock Exchange (NYSE) after ringing the bell setting the stock price at $47 in an initial public offering (IPO) on March 21, 2024 in New York City.
Spencer Platt | Getty Images
redditIts shares rose 7% on Friday after the company beat third-quarter estimates and signaled strong advertising growth.
The social media platform’s revenues rose 68% from a year ago to $585 million, beating LSEG’s forecast of $546 million. Earnings per share came in at 80 cents, above estimates of 51 cents.
Reddit also issued a better-than-expected sales outlook for the fourth quarter. The company is forecasting $655 million to $665 million, beating Wall Street’s estimate of $638 million.
Morgan Stanley analyst Brian Nowak wrote that these results “show the company’s continued progress on its advertising and platform initiatives.” “We are seeing both a long trend of growth in active advertisers (+75% YoY in Q3) and greater penetration in existing advertisers.”
Reddit said nine of its top 15 advertiser verticals grew more than 50%. Nowak highlighted Reddit’s ongoing investments in automation that increase return on ad spend.
Daily active users rose 19% year over year to 116 million, beating Wall Street’s forecast of 114 million.
Reddit attracted more people to the platform than Google and generated advertising revenue from those who created accounts. The company makes more money from logged in users and has recently expressed concerns that AI chat apps, including ChatGPT and Google’s AI Overview, could impact new user growth.
“I look forward to continuing to work with these partners on these issues, but they are not a significant traffic driver today,” CEO Steve Huffman said during the earnings call. “But I think there are a lot of opportunities there as long as we continue to work together.”
The company’s daily active unique users rose 7% year-over-year to 23.1 million, but fell short of the 12% growth seen in the second quarter. The number of logged-in users worldwide increased by 14%, reaching 50.2 million.
Reddit’s other revenues, which include data licensing partnerships with Google and OpenAI, rose 7% from the previous year to $36 million.
