Why RDDT Is Rising for a Second Straight Day

Reddit (RDDT) is climbing 2% this morning after rallying nearly 8% yesterday. In a note to investors yesterday afternoon, investment bank Piper Sandler contended that a technical update by the social media firm may enable it to attract more advertisers.

Reddit’s Update Could Be Significant

The company has made it easier for marketers to replicate on Reddit the ad campaigns that they’re using on Meta (META), Piper Sandler analyst Thomas Champion explained. As a result, the number of firms advertising on Reddit could meaningfully increase, Champion asserted. Such a development, in turn, could cause the firm’s revenue growth to accelerate, the analyst wrote.

A close up of a user’s hand scrolling through a mobile social media application.

Another Investment Bank Was Recently Bearish on RDDT

In a note to investors on Jan. 22, investment bank Roth Capital downgraded the stock to Neutral from Buy. The investment bank predicted that the company’s revenue growth would decelerate in upcoming quarters, and it expects RDDT’s EBITA margins to drop over the next year.

Additionally, Roth predicts that the company’s user growth will slow this year after it added a record number of users in 2024. It placed a $195 price target on RDDT.

The Recent Price Action of RDDT

In the last month, the shares have advanced 20%, while they are up 70% in the last three months.

While we acknowledge the potential of RDDT, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher 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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Disclosure: None. This article is originally published at Insider Monkey.