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Investing.com - Wells Fargo has raised its price target on Reddit (NYSE:RDDT) to $118.00 from $115.00 while maintaining an Equal Weight rating, citing stabilizing advertising trends and increased revenue estimates. Currently trading at $150.57, InvestingPro analysis suggests the stock is trading above its Fair Value, with a market capitalization of $27.78 billion.
The firm increased its Q2 2025 total revenue estimate to $427 million, representing 52% growth and aligning with the high end of Reddit’s guidance range of $410-430 million. Wells Fargo maintained its projection for 1.1 million daily active user additions for the quarter despite continued weakness in traffic data. This growth trajectory aligns with Reddit’s impressive last twelve months revenue growth of 64.12% and exceptional gross profit margin of 90.82%. InvestingPro subscribers can access 18 additional key insights about Reddit’s growth potential.
The bank revised its full-year advertising growth estimate upward to 45% year-over-year from 42.5% previously, noting that advertisers are increasingly testing Reddit, though spending remains exclusively focused on upper and mid-funnel marketing. For Q3 2025, Wells Fargo anticipates Reddit will guide for revenue of $460-480 million and adjusted EBITDA of $155-175 million. Reddit’s overall financial health score is rated as GREAT by InvestingPro, supported by strong cash flow and growth metrics.
Wells Fargo observed that while Reddit’s U.S., Canada, Australia, and New Zealand app daily active users and web traffic growth remain under pressure compared to levels seen before Q1 2025, these metrics appear to have stabilized at low-to-mid single-digit percentage year-over-year growth in recent weeks. The company may begin user acquisition marketing to offset any weakness from search volatility. The platform maintains strong financial fundamentals with a healthy current ratio of 12.46, indicating robust liquidity to support potential marketing initiatives.
Based on these factors, Wells Fargo raised its fiscal year 2025 and 2026 revenue forecasts by 2% and 3% to $1.86 billion and $2.33 billion respectively, while increasing its EBITDA estimates to $653 million for 2025 and $950 million for 2026, up from previous estimates of $624 million and $900 million. For comprehensive analysis of Reddit’s valuation and growth prospects, investors can access the detailed Pro Research Report available exclusively on InvestingPro.
In other recent news, Reddit has introduced two new AI-powered advertising tools aimed at enhancing brand engagement on the platform. These tools, "Reddit Insights" and "Conversation Summary Add-ons," are designed to help marketers leverage user conversations for more effective advertising. Meanwhile, Reddit has filed a lawsuit against AI firm Anthropic for allegedly unauthorized data usage, a legal move that highlights Reddit’s commitment to protecting its user data. In terms of financial projections, Loop Capital has adjusted its price target for Reddit to $200 from $210 due to concerns over slowing user growth, although it maintains a Buy rating on the stock. The firm still anticipates strong long-term growth, projecting the user base could double by 2029 with significant revenue potential.
Additionally, new data from Piper Sandler indicates that Reddit’s user numbers have declined for the third consecutive month, with a notable decrease in feed ad units. Despite these challenges, the broader digital advertising market is reportedly strengthening. Reddit is also undergoing a leadership change, with Chief Product Officer Pali Bhat set to leave the company. During his tenure, Bhat was credited with fostering a culture of execution and navigating significant challenges. Reddit continues to focus on strategic initiatives such as global expansion and advertising product development amidst these developments.
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