Leading discussion platform provider Reddit (NYSE:RDDT) gained over 14% at the time of writing after announcing a partnership with Microsoft (MSFT)-backed OpenAI. Under the deal, OpenAI will gain access to Reddit’s data and content to train its artificial intelligence (AI) models.
In exchange, Reddit’s users and moderators will be provided with new AI-powered features. Furthermore, OpenAI and Reddit will become advertising partners.
RDDT’s Efforts to Diversify Revenues
It should be mentioned that Reddit has entered into similar agreements in the recent past. In February, Reddit allowed Alphabet’s (GOOGL) Google to train its AI models, such as Gemini, by using its content.
Importantly, these partnerships reflect Reddit’s efforts to diversify beyond its advertising business and boost its top-line growth.
Earlier this month, Reddit posted its first results as a public company and disclosed that 92% of its revenue comes from advertising. Also, the non-ad revenues showed substantial growth, reflecting the company’s increasing focus on diversifying its income streams.
Is RDDT a Buy or Sell?
Following the partnership news, a Top-rated analyst from JMP Securities, Andrew Boone, reiterated a Buy rating on Reddit stock with a price target of $63, implying 11.7% upside potential.
Based on nine Buy, six Hold, and one Sell recommendations, the stock has a Moderate Buy consensus rating. The analysts’ average price target on RDDT stock of $58.40 implies an upside potential of 3.6% from current levels. Shares of the company have gained 22.6% since it began trading on March 21.
