1. Reddit Inc. (NYSE:RDDT)
Average Upside Potential as of March 21: 88.51%
Number of Hedge Fund Holders: 87
Reddit Inc. (NYSE:RDDT) operates a global digital community platform. This platform allows users to engage in conversations, explore interests, and form communities around specific topics through various media sharing and interaction features. It fosters a space for users to connect and share experiences.
In Q4 2024, the company’s advertising revenue surged by 60% year-over-year and reached $395 million. For the full year, advertising revenue drove total revenue to $1.3 billion, which marked a 62% increase. International advertising revenue grew by 77% year-over-year. This growth is attributed to the platform’s ability to connect brands with engaged users seeking trustworthy opinions. It’s seen across various advertising objectives, channels, verticals, and geographies.
Reddit Inc. (NYSE:RDDT) is enhancing its advertising platform to improve performance and usability. This includes investing in AI-powered tools like the AI Headline Generator and Memorable AI, which aim to attract more mid-market and SMB advertisers. The company is also focusing on brand safety and developing unique advertising solutions that use its community intelligence, such as Reddit Pro Trends. It’s also investing in increased automation of the ad stack, and diversification of advertisers.
The company’s exceptional quarterly earnings, user growth, and AI partnership news drove a stock surge, which made it a top performer for Columbia Threadneedle Global Technology Growth Strategy. The fund stated the following regarding Reddit Inc. (NYSE:RDDT) in its Q4 2024 investor letter:
“Reddit, Inc. (NYSE:RDDT) was the single best-performing stock for the fund, as the stock surged during the quarter, with significant outperformance following its stellar quarterly earnings release. The capital-light social news aggregation platform — and the ninth most-visited website in the world — reported quarterly revenue, user growth and profit margins that came in considerably higher than even the most bullish of estimates, and the company also provided forward-looking guidance that came in well ahead of expectations on most metrics. After earlier announcing a data licensing partnership with AI pioneer OpenAI, investors ‘up-voted’ the evolving AI narrative for Reddit after gaining a better understanding of its unique and hard-to-replicate trove of content generated by its growing and increasingly global user base.”
While we acknowledge the growth potential of Reddit Inc. (NYSE:RDDT), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RDDT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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