(US) Reddit's 1st Earnings Report Since Listing - Strong Growth Ahead!
(US) Reddit's 1st Earnings Report Since Listing - Strong Growth Ahead!

(US) Reddit's 1st Earnings Report Since Listing - Strong Growth Ahead!

Thu, May 9, 2024 10:40 AM

By Vincent Lau, Head of Equity Research, Rakuten Trade. 

 

Reddit Inc (RDDT) announced Q1 earnings revenue beat expectations and posted an adjusted profit in Q2, with shares popping more than 10% in after-hours trading.  

 

Here’s a breakdown for you on what’s happening with Reddit: 

Summary  

  • First-quarter revenue increase of 48% from a year ago to US$243.0 million, beating the average analyst estimate of US$212 million. 
  • The net loss was US$575.1 million, compared to US$60.9 million in the prior year.  
  • Stock-based compensation expenses and related taxes were US$595.5 million, compared to US$13.2 million in the prior year, driven by IPO charges. 
  • The GAAP earnings per share (EPS) were a loss of US$8.19 per share, which was also smaller than the expectation of a loss of US$8.71 per share. 

 

Highlights 

Reddit's revenue growth, driven mainly by the company's advertising, jumped +39% year-over-year (YoY) to US$222.7 million. The growth rate of digital advertising business revenue outpacing Meta's (META) 27%, followed by 24% growth at Amazon (AMZN) and 13% growth at Alphabet (GOOGL).  

  

The company reported 82.7 million daily active users (DAU) for Q1, a robust 37% YoY increase, surpassing the market expectation of 76.6 million. Furthermore, their average revenue per user worldwide rose 8% to US$2.94 from US$2.72 a year ago.  

  

Reddit CEO Steve Huffman mentioned this period as a robust beginning to the year and a pivotal quarter for Reddit and its communities. He believes it is the inception of a new era, marked by efforts to shape the next generation of Reddit. 

  

Looking ahead, Reddit aims to broaden its revenue sources by licensing its data to AI firms and enhancing e-commerce activities on its platform. The company recently finalized data licensing agreements valued at US$203 million, with terms ranging from two to three years.  

  

Reddit expects Q2 revenue to be between US$240 million and US$255 million, compared with an estimated US$223.8 million. It expects adjusted EBITDA to be between break-even and US$15 million in Q2, compared with estimates for a loss of US$18.2 million.  

  

Reddit's share price increased by +45.29% year-to-date, and the last traded price was US$49.39.  

  

Bloomberg consensus rating has 8 Buys, 7 Holds and 1 Sale with a 12-month target price of US$54.33 

 

Sources: Bloomberg, CNBC, Reuters, Reddit

 

As at 9pm, 8 May, Dow Jones Futures 38,973 (-0.14%). 

  

US markets is open from 9:30pm Malaysia time and you can place your orders anytime with real time feed at Rakuten Trade. 

 

For more upcoming updates on earnings, follow our official Telegram channel. 

 

Vincent Lau, a licensed research analyst by the Securities Commission Malaysia, who spearheaded the formation of Rakuten Trade Sdn Bhd's digital research team for retail investors. Presently, he serves as the Head of Equity Sales, leading digital news-driven trading ideas. With nearly 20 years in corporate finance, Lau has held prominent roles at Kenanga Investment Bank, RHB Islamic Bank, Standard Chartered Bank, and Hong Leong Islamic Bank. Lau is a graduate of Flinders University, holding a Bachelor of Commerce, and the University of Malaya, where he earned an MBA.