The Reddit (NYSE:RDDT) initial public offering (IPO) has been extremely successful so far. Shares of RDDT were priced at $34, the higher end of the targeted $31 to $34 range. The community forum company sold a total of 25.30 million shares, raising gross proceeds of $631.60 million. RDDT stock is currently trading in the high $60 range after closing at $59.80 on its first day of trading.
On top of that, Reddit received its first analyst price target and rating this morning. Led by analyst Dan Salmon, New Street Research initiated coverage of Reddit stock with a price target of $54 and a “neutral” rating.
Salmon had written about Reddit before its IPO with a bear case market capitalization of $5.3 billion and a bull case market cap of $16.7 billion.
RDDT Stock: New Street Sets Price Target at $54
The analyst expects significant volatility in RDDT stock until Reddit reports its first earnings, which Salmon forecasts to be in early May. He also expects volatility to continue until three days after the lockup period expires, which will be 180 days after the IPO.
As of now, Salmon is focused on three narratives. The analyst believes that the price of RDDT already accounts for a successful OpenAI data licensing contract while DAUq (daily active uniques) growth is the “#1 fundamental controversy.” Furthermore, he notes that the number of advertisers and the number of advertisers competing on auction bids is the most important factor in terms of generating ad revenue.
Salmon has forecasted 2024 revenue of $1.16 billion, signaling a 44% increase from 2023’s revenue of $804 million. He also forecasts revenue growth of 34% to $1.55 billion in 2025.
Notably, Reddit remains unprofitable with a 2023 loss of $90.8 million and an adjusted EBITDA loss of $69.3 million. Salmon expects the company to report a positive adjusted EBITDA of $172 million this year, $326 million in 2025 and $525 million in 2026.
On TipRanks, Salmon is ranked 398th out of 8,761 Wall Street analysts. He has a success rate of 62% and an average one-year return of 12.60%.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
