Reddit Surges After Earnings Beat - AltIndex’s Bullish Call Hits the Mark

May 1, 5:54 pm

Reddit (RDDT) has been one of the most volatile stocks this year, with a 52-week range of $44.60 to $230.41. But at AltIndex, we’ve been consistently bullish — and today, that conviction paid off.

For months, our alternative data models flagged Reddit’s exceptional user growth as a sign the stock was undervalued. In our March article Reddit: Undervalued Despite Massive Web Traffic?, we highlighted eye-catching signals:

• 5.2 billion monthly visits to Reddit.com — an all-time high, far ahead of Pinterest (1.3 billion) and Snapchat (196 million), and closing in on Facebook’s scale.
• 100,000+ daily app downloads, up 33% year-over-year, pointing to surging mobile adoption.
• Google searches for “Reddit” doubling over five years, showing growing brand awareness worldwide.

We argued that despite this massive scale, Reddit’s $18.3 billion market cap looked undervalued compared to peers like Pinterest ($17.8B) and Snapchat ($13.5B). Since that call, the stock climbed 8% — and today, it surged another 19% following a blowout Q1 earnings report.

Reddit reports strong sales and issues optimistic guidance

The results were outstanding: revenue soared 61% to $392.4 million, handily beating expectations, with ad revenue up 61% to $358.6 million. Other revenues rose 66%. Gross margin expanded to an impressive 90.5%. Most notably, Reddit swung to a GAAP net profit of $26.2 million, or $0.13 per share — far exceeding the $0.01 forecast. EBITDA exploded to $115.3 million, from just $10 million a year ago.

Cash flow also impressed, with operating cash flow hitting $127.6 million and free cash flow surging to $126.6 million, up from $29.2 million. By quarter-end, Reddit held $1.95 billion in liquidity.

On the user front — the heart of our bullish call — Reddit delivered again:

• Daily active unique users rose 31% to 108.1 million
• Logged-in daily users climbed 23%
• Weekly active users jumped 31% to 401.3 million
• Average revenue per user increased 23% overall, including 31% growth in the U.S.

Looking ahead, Reddit guided to Q2 revenue of $410–$430 million, far above the $390.7 million consensus, with EBITDA of $110–$130 million.

AltIndex’s early thesis on Reddit is a clear example of the power of alternative data in anticipating market moves. As Reddit’s audience and monetization continue to grow, we remain bullish on the growing social media player.

Disclaimer: The information provided is for educational and informational purposes only and should not be construed as financial or investment advice. All investments involve risk, and you should conduct your own research or consult a qualified professional before making any investment decisions.

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