Shares of Reddit (RDDT) jumped at the time of writing after Wells Fargo, led by four-star analyst Ken Gawrelski, initiated coverage on the social media company with a Buy rating and a $206 price target. Indeed, it argued that the market hasn’t fully recognized the firm’s near-term potential for improving ad monetization, and is “therefore underestimating Reddit’s growth potential.”
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Wells Fargo estimates that 60% of Reddit’s user engagement is monetizable and believes the platform can boost revenue by increasing the number of ads and introducing new ad formats. The analysts see minimal risk from Google search referral traffic, which they estimate makes up less than 20% of Reddit’s total traffic. However, they note that Reddit may face a choice between maintaining search referral traffic and prioritizing data licensing opportunities to fuel growth.
It’s worth noting that, so far, Gawrelsk has enjoyed a 66% success rate on his stock ratings, with an average return of 11.1% per rating.
Investor Sentiment for RDDT Stock Is Currently Very Positive
And it is not just analysts who are positive on the stock. In fact, the sentiment among TipRanks investors is currently very positive. Interestingly, 11.5% of those holding the stock increased their positions in the last 30 days. Furthermore, only 0.5% of the 772,494 portfolios tracked by TipRanks actually hold shares, which suggests that RDDT is still an overlooked stock by many. This means that there is room for investors to pile into the stock if the business continues to perform well going forward.
What Is the Target Price for RDDT Stock?
Analysts remain cautiously optimistic about RDDT stock, with a Moderate Buy consensus rating based on 10 Buys, five Holds, and one Sell. Since its IPO, Reddit stock has surged by more than 257%, and the average RDDT price target of $116.69 implies a downside risk of 29% from current levels.
