Reddit target raised at Needham & Company as core ad fundamentals exceeding prior estimates

Needham & Company analysts raised the price target for Reddit (RDDT) to $75 from $63 per share in a note Tuesday, maintaining a Buy rating on the social media platform’s stock.

The investment firm said RDDT’s core advertising fundamentals and user adds are exceeding their prior estimates, and its operating costs are growing more slowly than prior estimates.

“Our projected data licensing revs (at 85% margins) have nearly doubled since our initiation report, thanks to its new 3-year deal with OpenAI, which should add to RDDT’s rev and FCF beginning in 3Q24,” writes Needham.

The firm expects additional data-licensing deals to be announced in the second half of this year and 2025.

Overall, Needham said factors such as Reddit’s GenAI revenue stream, user growth, engagement, ad revenue growth, expanding margins, and international growth, make up its bull case for the stock.