Shares of Reddit (RDDT, Financial) experienced a significant surge today, with the stock price rising to $113.20, representing a remarkable 38.48% jump. This upward movement was propelled by the company's impressive third-quarter performance in 2024, which greatly exceeded market expectations.
Reddit (RDDT, Financial) has continued its impressive stock market journey since its IPO seven months ago, attaining a market capitalization of approximately $18.78 billion. The company's third-quarter results were a key catalyst for the recent price movement. Reddit's revenue for the quarter reached $348 million, reflecting a 68% year-over-year increase, surpassing analysts' expectations of $313 million. Moreover, Reddit's earnings per diluted share turned positive, shifting from a net loss of $0.13 to a profit of $0.16. Despite these achievements, the stock does not currently have a forward price-to-earnings (P/E) ratio due to negative trailing earnings.
The company also recorded substantial growth in its active user base, with a 51% increase in the U.S. and a 44% rise internationally. Furthermore, the average revenue per user (ARPU) witnessed a mid-teen percentage boost globally, which contributed to a 56% rise in worldwide ad sales. Notably, the "other revenue" category saw a massive 547% increase, bolstered by data licensing partnerships, a crucial growth segment accounting for 9.5% of the third-quarter sales.
From a financial health perspective, Reddit (RDDT, Financial) displays strong financial strength, supported by an Altman Z-Score of 43.18, indicating a robust balance sheet. The company's price-to-book ratio stands at 9.9, close to its 1-year high, suggesting that the market could be overvaluing Reddit's assets relative to its book value.
Despite the positive outlook, there are some warning signs to consider. The stock's price as well as its P/S ratio are nearing their 1-year highs, and there has been notable insider selling activity, with 838,712 shares sold over the past three months. Nonetheless, Reddit's stock exhibits a strong growth narrative and is classified as a speculative growth stock, which might appeal to growth-oriented investors.
Investors interested in evaluating Reddit's intrinsic value can refer to the GF Value for additional insights into the company's valuation metrics.
