Anticipating Reddit’s Q4 2024 Earnings: What to Expect
Reddit (RDDT) is scheduled to announce its fourth-quarter 2024 earnings on February 12.
Check out the latest EPS estimates and surprises on Zacks Earnings Calendar.
Revenue and Earnings Estimates
For Q4 2024, Reddit is projecting revenues between $385 million and $400 million. In contrast, the Zacks Consensus Estimate expects revenues to reach $408.01 million.
The earnings consensus stands at 24 cents per share, which has seen a slight increase of one cent over the past month.
Reddit Inc. Price and EPS Surprise
Reddit Inc. price-eps-surprise | Reddit Inc. Quote
Let’s examine the factors likely impacting this quarter’s performance.
Key Influencers of Q4 Performance
Reddit’s performance in the fourth quarter is expected to benefit from rising advertising sales alongside its growing AI initiatives.
The advertising segment has shown strong growth, with advancements across various objectives, channels, and regions. This trend is expected to continue as Reddit enhances its ad performance. The company anticipates notable growth from mid-market and SMB customers in the upcoming quarter.
AI-driven tools for advertisers, including auto bidding and expanded ad offerings, have also contributed to improved ad performance. These innovations are likely to enhance the experience for both advertisers and users this quarter.
Reddit has rolled out tools like Reddit Pro, allowing businesses to connect with their target audiences more effectively. In addition to the advertising enhancements, Reddit is committed to improving user experiences, making relevant content easier to find. This focus is expected to foster greater user engagement in Q4.
Efforts to refine ad solutions, particularly those that assist in the middle and lower funnel, have seen increased uptake among advertisers. This strategy is projected to further boost revenue, especially in sectors such as automotive, consumer goods, financial services, and pharmaceuticals.
An expanding international user base, notably in countries like France, India, and the Philippines, is also a significant factor. Enhancements in machine translation are expected to make the platform more accessible, potentially increasing user engagement and revenue this quarter.
Over the past six months, RDDT shares have surged by 329.9%, far exceeding the 13.6% gain in the Zacks Computer & Technology sector and the 38.6% rise in the Zacks Internet – Software industry.
Image Source: Zacks Investment Research
In comparison, Meta Platforms (META) has increased by 38.5% in the same timeframe, as the company seeks to strengthen its advertising capabilities in the market.
Despite this, the Value Score of F for RDDT indicates a stretched valuation, presenting risks for conservative investors.
Currently, RDDT shares trade at a forward 12-month Price/Sales ratio of 21.65X, compared to the industry average of 3.31X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
AI-Driven Innovations Shape Reddit’s Future
Reddit’s growing partner network further enhances its competitive edge. The collaboration with Alphabet (GOOGL) improves content discovery and community interaction by leveraging Reddit’s Data API, which also supports AI developments.
In December 2024, Reddit introduced the testing phase for “Reddit Answers,” an AI chatbot powered by collaboration with Reddit, Google, and OpenAI. This tool provides U.S. users with curated summaries and recommendations, promising to significantly drive user engagement and retention in the upcoming quarter.
The partnership with Integral Ad Science (IAS) reinforces Reddit’s growth in advertising. IAS’s AI-driven solutions enhance trust and provide vital measurement tools, ensuring brand safety and fostering advertiser confidence.
Is Reddit a Smart Investment or a Risky Proposition?
With a robust portfolio and an expanding partner network, Reddit holds considerable strengths. A Growth Score of A indicates promising long-term growth potential for current investors.
However, potential impacts from upcoming elections may influence ad revenues and user engagement for Q4.
Additionally, economic uncertainty and strong competition within the social media sector could challenge both user engagement and ad market share.
Currently, Reddit has a Zacks Rank #3 (Hold), suggesting investors may want to wait for a more favorable opportunity to buy into the stock. For those interested, you can find a complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
