Reddit 'poised to capitalize on strong social media growth' says Guggenheim

December 20, 2024 10:37 AM PST | By Investing

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Reddit 'poised to capitalize on strong social media growth' says Guggenheim

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Investing.com -- Reddit has emerged as a standout pick in the internet sector for 2025, according to Guggenheim analysts, who initiated coverage of the company with a Buy rating and a $210 price target.

The firm said in a note Friday that it is optimistic about Reddit’s prospects, citing a combination of user growth, improved monetization, and expanding business initiatives as key drivers of success.

Guggenheim highlighted Reddit’s impressive 47% growth in its daily user base over the past year, along with record-high search interest as 2024 concludes.

These metrics are said to underscore a platform with increasing consumer engagement, providing a strong foundation for monetization.

“We believe Reddit is poised to capitalize on strong social media growth in the quarters and years ahead,” the note stated, pointing to opportunities in ad monetization, search, data licensing, and commerce.

The analysts emphasized Reddit’s significant untapped potential in advertising.

“Comparative financial analysis indicates significant monetization opportunity on a per daily user basis,” they explained, suggesting that Reddit could close its pricing gap through platform improvements and growing advertiser demand.

Guggenheim is ahead of consensus estimates for 2025, projecting revenue growth 10% higher and adjusted EBITDA 30% higher than current expectations.

Looking ahead, the firm believes Reddit’s growth trajectory positions it as a leader in the sector.

The analysts forecast 42% annual EBITDA growth from 2026 to 2028, significantly outpacing the 22% average growth of its peer group.

The firm feels the potential justifies the valuation of Reddit at 35x its 2026 EBITDA estimate, a premium compared to the broader industry’s multiple of 19x.

This article first appeared in Investing.com

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