Following a much-anticipated initial public offering (IPO), social media firm Reddit (NYSE:RDDT) faces another big test: Its first earnings report as a publicly traded enterprise. The company will disclose its financial performance later today following the closing bell. A lack of profitability hangs over RDDT stock, although optimists will point to Reddit’s data goldmine as a hot catalyst.
For the first quarter of fiscal 2024, analysts anticipate a loss per share of $2.34. According to Zacks Equity Research, this estimate has remained the same in the past 30 days. On the top line, experts are modeling revenue to hit $212.43 million.
For the full year, the loss per share could come out to $6.77 on revenue of $987.72 million. In terms of the best-case scenario, Wall Street is looking for a loss of $5.67 per share on revenue of $1.06 billion.
While these statistics might not be groundbreaking, Zacks points out that part of Reddit’s appeal is its vast communities covering a range of different topics. In December last year, the platform saw more than 500 million visitors. In calendar Q4, the company saw an average of 73.1 million daily active “uniques” (DAUq).
RDDT Stock Faces Risks and Opportunities
Looking out to fiscal 2025, analysts have laid out a blue-sky target of $1.31 billion on the top line. Yet even with the projected robust growth, the best-case scenario for profitability still calls for a loss of $1.16 per share. Subsequently, one of the biggest concerns for RDDT stock is the apparent inability to print a positive figure on the bottom line.
As Business Insider mentioned, “Reddit was founded nearly two decades ago, yet it’s never turned a profit.” Another risk factor that clouds RDDT stock is broader risk-on sentiment. While the benchmark indices are performing well this year, they incurred some volatility last month. That might affect perceptions for companies that are struggling in the profitability department.
However, investors should not leave the auditorium with the impression that RDDT stock is destined for disappointment. In particular, Reddit features a data licensing agreement with Google under Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). With Reddit again covering myriad topics, its communities offer a valuable training ground for generative artificial intelligence (AI) models.
Further, RDDT stock is unique in that the underlying company is oriented toward its users. For example, 8% of Reddit IPO shares were allocated to dedicated users. For the Q1 report, management will be taking questions from its users via the subreddit r/RDDT.
Why It Matters
According to Barron’s, RDDT stock features an analyst consensus view of overweight. This assessment breaks down as eight buys, six holds and one underweight rating. The average price target lands at $49.47, which only calls for a very modest return.
On the date of publication, Josh Enomoto did not have (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.
