Several major Wall Street firms have initiated coverage of Reddit, the social media company that made its stock market debut on March 21. The stock experienced a 48% surge on its first day, closing at $50.44. As of the close of trading on Friday, Reddit’s stock has seen a 24% increase from its initial offering price of $34 per share. However, it’s worth noting that Reddit opened at $47 per share when it first started trading last month, meaning investors who bought at that price have already experienced a 10% loss.
Major Banks Adopt Wait-and-See Approach
Several notable banks, including JPMorgan, have adopted a wait-and-see approach as they begin their coverage of Reddit. JPMorgan analyst Doug Anmuth stated, “We recognize that there is likely upside to near-term numbers, but we remain on the sidelines.” Anmuth, who rated the company as neutral and set a price target of $47, is keeping a close eye on several metrics, including Reddit’s traction in the online ad space.
Goldman Sachs and Morgan Stanley have also issued neutral ratings on Reddit. These three banks, along with Bank of America, were the lead underwriters of Reddit’s public offering. Goldman analyst Eric Sheridan highlighted several long-term growth themes, including artificial intelligence, digital advertising, and the growth of the creator economy. However, he believes near-term obstacles may dampen these catalysts.
Other Analysts Offer More Optimistic Outlooks
Analysts from Citi and Deutsche Bank have more optimistic near-term outlooks for Reddit. Citi analyst Ronald Josey’s price target of $53, which forecasts a 25% upside, is among the highest on the Street. Josey acknowledges Reddit’s current challenges but believes these are outweighed by the platform’s catalysts, including improving engagement trends and monetization, expanding margins, and data licensing opportunities.
Deutsche Bank analyst Benjamin Black cited many of the same catalysts as the reasoning behind his $50 price target, which corresponds to an 18% gain. “We think Reddit is on the early end of a number of positive inflections,” the analyst wrote.
