Shares of Reddit Inc (RDDT, Financial) surged to an all-time high of $167 on Monday after Morgan Stanley analysts upgraded the stock, saying there are multiple levers for growth heading into 2025. The analysts raised the stock to 'overweight' from 'equal weight' and increased its price target to $200 from $70 after the company expanded its user base faster than expected and developed new advertising technologies.
"RDDT is fast shipping engagement and ad products and has leverage to grow by orders of magnitude," analysts said in a note.
Despite projections, Reddit's daily active users (DAUs) grew about 20% from its forecast and are expected to continue to grow. Also, they cited features such as improved search tools and a partnership with Alphabet, maker of Google, that directs traffic to Reddit links as counterpart factors driving increased user engagement and time.
Its matching ad pricing to competitors like Meta (META, Financial) and Google (GOOG, Financial) will depend on Reddit growing its user base and ad tools on the social media site. In 2025, we should see new ad products that involve automation and artificial intelligence.
Reddit also announced a trial of 'Reddit Answers,' an AI-driven search feature that summarizes top threads. The tool was initially intended for and limited to some U.S. users, seeking to improve search capability and user responsiveness.
