Up 45% since its initial public offering in March of this year, Reddit (NYSE:RDDT) has emerged as one of the best technology stocks that investors can buy. Reddit stock has come out of the as gate strong as just about any company that’s held an IPO in the last four years.
In the last month alone, the stock has risen nearly 20% on the back of a much better-than-expected debut earnings report and a slew of positive news that is expected to drive the company to a prosperous future. With growing momentum, RDDT stock looks poised for further gains.
A Solid First Print
Reddit, which runs online message boards such as the infamous WallStreetBets, came out with an inaugural earnings print that was very strong.
Less than two months after going public, the still unprofitable Reddit reported a loss per share of $8.19, which was not as bad as a loss of $8.71 that was expected among analysts.
Revenue in what was this year’s first quarter totaled $243 million versus $212.8 million expected on Wall Street. Sales were up an impressive 48% from a year earlier.
More importantly, Reddit announced $222.7 million in advertising revenue for the quarter, up nearly 40% year over year.
The company said that it had 82.7 million daily active users at the end of Q1, more than the 76.6 million expected by analysts. Average revenue per user rose 8% to $2.94.
Reddit’s stock jumped 15% higher on news of the stellar first earnings report, which surpassed even the most bullish forecasts.
OpenAI Partnership
In addition to its excellent Q1 results, Reddit stock is also rising on news that the company has formed a potentially lucrative partnership with OpenAI.
The new partnership allows Reddit to leverage OpenAI’s technology, including its ChatGPT platform, to build tools and features that integrate Reddit’s content in real-time.
OpenAI has also committed to becoming an advertising partner of Reddit, which is huge as the company continues to generate nearly 100% of its revenue from online advertising on its message boards.
The OpenAI partnership is expected to attract more users to Reddit’s social media platform with AI-enhancements and increased advertising. RDDT stock rose 11% on news of the partnership with OpenAI.
More recently, Reddit stock increased 9% after the company publicly announced a new platform update that blocks content scraping on its message boards by AI startup companies.
This was an issue that had riled up Reddit users, who were concerned that their posts and data on the social media site were being taken without permission and used to inform generative AI applications and models.
Buy Reddit Stock
Reddit stock seems to have momentum behind it and is likely headed for more gains. Since going public a few months ago, the company has won over its detractors with strong financial results and its partnership with OpenAI.
The company’s social media site appears to be attracting a growing and loyal user base, and the opportunity presented by AI looks appealing as well. Given its impressive gains and bright future, Reddit stock is a buy.
On the date of publication, Joel Baglole 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.
