Reddit stock price: 3 reasons why RDDT is soaring to all-time highs

Reddit stock is having the best day in its short history after the social media platform announced third-quarter 2024 results yesterday that were better than most analysts expected. Investors are rewarding the company. In premarket trading this morning, Reddit shares (NYSE: RDDT) are trading up over 24% as of the time of this writing.

Reddit reported its first profitable quarter

Reddit had a great fiscal third quarter, which ended on September 30, 2024. Part of that is because the company saw strong growth in numerous critical categories. But another reason that quarter was so stellar—and a big reason the stock is up so much in premarket—is because the company surpassed most analysts’ expectations for the quarter to boot.

For its Q3 2024, Reddit reported:

• $348.4 million in total revenue (up 68% from the quarter a year earlier)
• $315.1 million of that revenue was derived from ads (a 56% year-over-year increase)
• $29.9 million in net income (compared to a net loss of $7.4 million for the quarter a year earlier)

To put that total revenue figure in perspective, many analysts expected Reddit to post lower revenue of $312.8 million, notes CNBC. In the end, Reddit had an earnings per share of 16 cents for the quarter versus the 7 cents analysts were expecting.

Reddit’s users grew, too

But it wasn’t just the additional revenue and net income that made Reddit investors happy this morning. Two other factors have influenced RDDT’s stock surge.

The first is that Reddit also reported very healthy growth in what it calls its Daily Active Uniques (“DAUq”). Reddit defines a DAUq “as a user whom we can identify with a unique identifier who has visited a page on the Reddit website, www.reddit.com, or opened a Reddit application at least once during a 24-hour period.” In other words, a DAUq is an individual user visiting Reddit on any particular day.

And for the quarter, Reddit’s global DAUq’s were up 47% year-over-year to 97.2 million (for the quarter a year earlier, Reddit had 66 million DAUq’s).

When breaking down DAUq’s further, Reddit revealed that U.S.-based DAUq’s totaled 48.2 million for the quarter (growth of 51%) and international DAUq’s totaled 49 million for the quarter (growth of 44%).

Any way you slice it, no matter if they are domestic or international, more people are using Reddit. And for a site that relies on user-generated content, that’s music to investors’ ears.

Reddit’s forecast pleased investors as well

Another additional factor that seems to have helped light the fire under RDDT stock this morning was the company’s fourth-quarter earnings forecast—the quarter Reddit is currently in right now.

For Q4, Reddit expects revenue to be between $385 million and $400 million, and it expects an adjusted EBITDA of between $110 million and $125 million. As CNBC notes, many analysts had expected a revenue forecast of $357.9 million for the quarter. Analysts on average also expected an adjusted EBITDA of $85.2 million.

In other words, Reddit believes it has a rosier near-term future than analysts assumed.

RDDT’s first year is off to a good start

Before 2024, Reddit was still a private company despite having been one of the most popular websites in the world for nearly 20 years. The company was founded in 2005 but didn’t go public until March 21 this year.

Upon its initial public offering (IPO), Reddit shares went on sale for $47 apiece. As of today’s premarket price, RDDT shares have now more than doubled in just over seven months.

Announcing Reddit’s stellar Q3 results, CEO Steve Huffman said, “It was another strong quarter for Reddit and our communities as we achieved important milestones, including new levels of user traffic, revenue growth, and profitability. Reddit continues to be one of the most visited and trusted sites in the world with opportunities available to us that aren’t available to most companies.”