Reddit (RDDT) Posts Mixed Q4 Results, Revenue Beats but EPS Misses Estimates
Reddit (RDDT) shares initially plunged 18% in after-hours trading on Wednesday following the company's release of mixed fourth-quarter earnings.
Key Financial Metrics:
- Revenue: $427.7 million, up 70% YoY and surpassing the consensus estimate of $405.5 million
- Diluted EPS: $0.36, missing analysts' estimates of $0.48
- Daily Active Users (DAUs): 101.7 million, up 40% YoY but below the expected 103.8 million
Key Highlights:
- CEO Steve Huffman attributes traffic volatility to a Google Search algorithm change in late Q4, which has since recovered in Q1.
- Reddit's focus on converting logged-out users into active account holders and enhancing its internal search tool, Reddit Answers, aims to reduce reliance on Google Search.
- Revenue guidance for Q1 2025 exceeds analysts' estimates, with the company expecting $360-$370 million.
- Adjusted EBITDA guidance of $80-$90 million also surpasses expectations.
Post-IPO Performance and Analyst Outlook:
- Reddit's revenue has consistently exceeded expectations since its IPO last year, driven by deals with AI tech giants and digital advertising growth.
- The company reported its first-ever profit as a public company in Q3, fueled by AI-driven advertising revenue growth.
- Reddit's stock performance highlights its status as an "AI play," with shares up over 33% YTD and 363% since February 2024.
- Despite the mixed Q4 results, analysts at Deutsche Bank, Jefferies, and Raymond James maintain Buy ratings for RDDT, citing strong advertising revenue, licensing deals, and international growth prospects.