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Investing.com -- Evercore ISI initiated coverage ofReddit Inc (NYSE:RDDT)with an Outperform rating, saying the platform has more room to turn user engagement into revenue.
Analyst has a $320 price target, about 30% upside. Evercore says Reddit’s valuation looks demanding but justified by its growth outlook.
Revenue is expected to grow at a 30% to 40% annual pace over the next three years, with profits rising even faster as the business scales, according to brokerage.
Redditstill earns far less per user than comparable platforms, even though engagement is high.That’s where Evercore sees scope to close that gap as recent product launches and advertising improvements begin to show through.New tools such as improved ad formats and better targeting are expected to help convert Reddit’s large base of search-driven and logged-out users into higher-value customers for advertisers.
Daily and weekly active users are growing at double-digit rates, with international markets expanding faster than the U.S.According to analysts changes to onboarding and a more personalised home feed should support engagement and make it easier to turn casual visitors into regular users.
The platform’s vast archive of posts and comments is increasingly valuable to large language model developers, with content licensing deals expected to generate meaningful high-margin revenue over the next few years.
While acknowledging comparisons with past social media stocks that struggled to sustain growth after early success, Evercore argued Reddit is in a different position.It said Reddit is already more profitable than many peers were at similar stages and benefits from high-intent content that resembles search, supporting more durable growth.
