Reddit Inc. shares climbed in premarket trading on Friday, extending gains from the previous session, as analyst optimism and strong financial performance continued to drive investor interest. Loop Capital reiterated its Buy rating and $260 price target, a level the firm believes the stock can reach. According to Google Finance, Reddit traded at $185.60 before the bell, up 0.92%, after closing Thursday at $183.91, an 8.51% increase.
The renewed bullish call comes amid a broader reassessment of Reddit's valuation, with analysts viewing the recent pullback as a valuation reset rather than a fundamental shift. StockStory highlighted Loop's report, which projects over 50% upside from shares trading near $169, citing robust revenue growth, advertiser expansion, and revenue from AI data licensing—payments for Reddit content used by artificial intelligence tools.
U.S. markets are open for normal trading hours Friday, with the New York Stock Exchange and Nasdaq operating from 9:30 a.m. to 4 p.m. Eastern. The next market holiday is Juneteenth on June 19. Premarket activity typically involves lower volume and thinner liquidity.
Reddit CEO Steve Huffman addressed investors at the BofA Securities technology conference on June 3, emphasizing the company's long-term growth ambitions. Huffman stated that Reddit continues to explore ways to "10x our user base" and "20x our revenue," while acknowledging a longer path to reaching 1 billion daily active users globally.
Reddit's latest quarterly results provided a strong foundation for the bullish outlook. The company reported a 17% year-over-year increase in first-quarter daily active uniques, reaching 126.8 million. Revenue surged 69% to $663 million, while net income hit $204 million. Huffman described Reddit as a "one-of-one business" driven by communities and "authentic human conversation."
Advertising growth remains a key focus. Chief Operating Officer Jen Wong told Reuters after the quarter that the "active advertiser count grew 75% year-over-year," with performance ads—those tied to purchases, installs, or sign-ups—accounting for over 60% of ad revenue. Wong noted that partners continue to plan "month to month" due to market volatility but said there was no material change in commitments.
Reddit is competing for advertising dollars against larger players like Meta Platforms, Snap, and Pinterest, but from a smaller scale. According to Zacks, Reddit's shares have outperformed those three over the past year. However, the note also highlighted tough competition in digital advertising and high valuation as potential risks.
Options traders have taken notice of the bullish sentiment. TheFly, via TipRanks, flagged unusually high bullish call option activity in Reddit, with call options trading at about double expected volume. Weekly $185 and $190 calls expiring June 5 were among the most active.
Despite the positive momentum, the setup carries risks. Reddit still needs to demonstrate that its ad products can attract more dollars without alienating users, especially as Meta has launched a forum app for discussion groups. If ad sales slow, AI data licensing demand declines, or the market revalues growth stocks downward, the bullish thesis could unravel.
Reddit now faces the challenge of delivering on its second-quarter guidance. The company targets revenue between $715 million and $725 million, with adjusted EBITDA of $285 million to $295 million. This leaves little margin for error following the stock's sharp rally, and any miss could trigger a significant pullback.
