Reddit Stock Slumps in October Discover Why Analysts Predict a Brighter Future
Reddit (RDDT) stock has faced challenges in October, dropping nearly 12% month-to-date. Analysts are, however, optimistic about the company’s future.
Analyst Insights on Reddit Stock
Youssef Squali, a Truist analyst, commented on the potential for a reversal in fortunes. He anticipates a robust earnings report for the third quarter, scheduled for release on October 30. Squali believes Reddit’s results will be at the high end of current expectations.
- Recent Stock Performance: Reddit shares were down 12% for the month, despite a 2% increase on a recent trading day.
- Price Target Increase: Squali raised his price target for Reddit stock from $225 to $260.
Growth Catalysts
Several factors could give Reddit a boost going forward:
- Unified Search Function: A new plan to enhance the platform’s search capabilities.
- Generative AI Features: The recently launched AI-powered Answers feature is gaining traction, aiming to attract more users.
Currently, Reddit’s core search product sees 70 million users weekly, while the AI Answers feature engages approximately 6 million weekly active users, which reflects significant growth but still represents a small portion of Reddit’s overall audience of “hundreds of millions.” This growth in search functionality could also enhance Reddit’s advertising revenue and assist users in discovering new subreddits more easily.
Market Position and Competition
Despite a recent dip in stock price, Reddit’s Relative Strength Rating remains high at 97 out of 99, indicating strong performance over the past year. Some challenges arise from competition with search engines like Google, which are integrating more AI-driven features. A report indicated a reduction in ChatGPT’s citations of Reddit content, leading to concerns over traffic. Nevertheless, Squali reassured investors that Reddit’s citations within Google’s AI-driven searches have remained stable.
- Market Share Insight: Google controls over 90% of the market share for search referral traffic.
- Strong User Growth Potential: Analysts believe there is significant opportunity for Reddit, especially in international markets.
Conclusion
While Reddit stock has experienced volatility this month, analysts predict a brighter future. With promising quarterly results on the horizon and ongoing enhancements to its platform, Reddit may well recover from its recent setbacks. Investors and users alike are watching closely as October progresses.
