Reddit Posts Solid Q4, Analysts Expect AI Language Translations To Grow Daily Active Users

Shares of Reddit Inc RDDT tanked in early trading on Thursday, despite the company reporting upbeat fourth-quarter results.

Here are some key analyst takeaways.

• Piper Sandler analyst Thomas Champion maintained an Overweight rating, while raising the price target from $197 to $210.
• JMP Securities analyst Andrew Boone reiterated a Market Outperform rating, while lifting the price target from $190 to $200.
• Needham analyst Laura Martin maintained a Buy rating, while raising the price target from $190 to $220.
• Goldman Sachs analyst Eric Sheridan reiterated a Neutral rating, while lifting the price target from $176 to $185.
• JPMorgan analyst Doug Anmuth reiterated a Neutral rating, while cutting the price target from $142 to $185.

Check out other analyst stock ratings.

Piper Sandler: Reddit delivered "another quarter of strong results," with revenues of $428 million, up 71% year-on-year and 23% sequentially, Champion said. "User growth remains solid with Global DAUs (daily active users) climbing to around 102 million on average in the fourth quarter, he added.

"Management highlighted the improvements to ML models including translating content via machine translation," the analyst wrote. The number of languages will expand from the current eight in 2025 and "is driving 40-50% of international user growth," he further wrote.

JMP Securities: Reddit reported DAU and revenue 2% and 5% above consensus, respectively, while EBITDA came in $23 million higher, Boone said. "However, the revenue beat tightened (vs. 3Q24) and U.S. DAUq declined Q/Q," he added.

The sequential decline in US DAUs "highlights the volatility of SEO as Reddit's goal of reaching 1B DAU seems further away after the quarter," the analyst wrote. The company has "multiple growth levers" that can support meaningful free cash flow ahead, he further stated.

Needham: Reddit's fourth-quarter revenue growth accelerated to 71% year-on-year from 62% in 2024, Martin said. Total ad revenues in the quarter reached $395 million, up 60% year-on-year, she added.

The company reported DAUs of 101.7 million, up 39% year-on-year and 5% sequentially, including 46% growth in international DAUs, the analyst stated. "AI-driven language translations should accelerate int’l DAU growth in FY25," she further wrote.

Goldman Sachs: Reddit's fourth-quarter results, which came in "solidly above the guided range," reflects continued operating momentum, Sheridan said. US DAUs came in below Street estimates due to Google traffic changes but this was offset by strong international user growth, he added.

Management's commentary was positive around "both the scope/impact of AI across the platform as well as continued progress on monetization in the coming years," the analyst stated. "Our conviction level in Reddit's ability to sustainably grow revenues well above industry average rates increased with this set of results," he further wrote.

JPMorgan: While DAU growth softened after Thanksgiving, this was due to a change in the Google search algorithm, Anmuth said. "The search traffic headwinds did not impact either logged in user growth or the fourth-quarter revenue, and the company indicated that search traffic has recovered so far in the first quarter, he added.

"Despite DAUq headwinds, Reddit continues to execute well & capture share of advertiser budgets," the analyst wrote. Strong revenue growth and improved cost leverage supported strong profit gains, with Reddit growing revenue around 4.2 times faster than non-GAAP expenses in 2024, he further stated.

Price Action: Shares of Reddit had declined by 5.53% to $204.50 at the time of publication on Thursday.

Read More:

• Reddit CEO Acknowledges Google Search Update’s Impact On Traffic But Shrugs It Off: ‘These Changes Happen All The Time’

Image: Shutterstock