Reddit Upgraded to Buy by Loop Capital, Shares Gain 4%

Reddit (NYSE:RDDT) shares rose more than 4% pre-market today after Loop Capital upgraded the company to a Buy from Hold . The upgrade comes after the social media platform's shares dropped nearly 20% since July 15, now trading at 7.8 times the firm's 2025 estimated revenue. Maintaining a price target of $75 per share, Loop Capital sees a 23% upside potential for Reddit.

Despite anticipated selling pressure with the upcoming lockup expiration on August 9, Loop Capital highlighted Reddit's attractive current valuation. They are optimistic about Reddit's potential to exceed both their and Street's estimates in terms of users, revenue, and adjusted EBITDA.

The firm also anticipates that an incremental 1% increase in advertising ARPU and data licensing, including the OpenAI deal, will drive Q2 revenue beyond the high end of guidance. Looking ahead, Loop Capital projects that Reddit's 2024 revenue will surpass Street consensus with similar assumptions, bolstering their positive outlook on the stock.