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Reddit, the popular social media platform, saw its shares surge 14% on Wednesday following its first earnings report since going public.
The company impressed investors with robust revenue growth and improved profitability.
Reddit surprised Wall Street by forecasting a potential adjusted profit in the second quarter, far surpassing estimates. Its revenue outlook also exceeded expectations, indicating strong growth prospects.
The strong performance in the first quarter of 2024 was attributed to Reddit’s focus on expanding its advertising business and securing content licensing deals with AI-focused companies like Google. Analysts noted that Reddit’s efforts in these areas were paying off.
Analysts expressed bullish sentiments, highlighting Reddit’s potential for further growth in ad revenue. Despite being founded in 2005, Reddit is still considered in the early stages of monetization, with opportunities for expanded ad targeting and measurement tools.
Reddit’s vast user-generated content across its numerous discussion forums, or subreddits, has made it an appealing partner for companies seeking to train AI models. This aspect has contributed to its attractiveness to advertisers and investors alike.
Following the share price surge, Reddit’s market capitalization was poised to increase by over $1 billion, reaching over $9 billion.
Analysts raised their price targets on Reddit’s stock, with a median view of $55, reflecting optimism about its future growth potential.
Analysts emphasized that Reddit is still in the early stages of developing its advertising business and has significant untapped international user opportunities. This suggests continued growth prospects in the long term.
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