Bull of the Day: Reddit (RDDT)

Reddit (RDDT) is a Zack Rank #1 (Strong Buy) that operates a community-based social media platform organized around “subreddits,” which are individual forums dedicated to specific interests, topics, and hobbies. Users post content, vote posts, and comments up or down, and engage in real-time discussions.

Reddit generates revenue mainly from advertising, and recently, from licensing its massive dataset to companies. especially AI firms, for model training and content insights.

The company just delivered an impressive quarter, but investors quickly shifted into profit taking. Shares pulled back right after the earnings release, then fell further during the broader market selloff. However, the stock has since rebounded and returned to the levels seen before earnings.

So now the question is if this stock is ready to take out all-time highs, or if there is a period of consolidation

About the Company

Reddit has quietly evolved from a quirky corner of the internet into one of the most powerful community platforms in the world. But with a unique model built around user-generated content, highly engaged communities, and a fast-growing advertising business, Reddit is now positioning itself as a data and content engine in the era of AI.

After years of operating privately, Reddit’s push into monetization, including new partnerships with AI companies and expanding ad formats, is driving momentum.

RDDT is valued at $40 billion and has a forward PE of 88. The stock has Zacks Style Scores of “F” in Value, but “A” in Growth.

Q3 Earnings Beat

Reddit delivered a standout Q3, beating EPS by 51% and showing accelerating operating leverage. The company reported EPS of $0.80 vs. $0.52 expected and revenue of $585M vs. $543M expected. The quarter was fueled by surging advertiser demand and stronger user monetization.

Adjusted EBITDA hit $236M, more than doubling year over year, with margins expanding to 40.3% from 27% a year ago.

Key engagement metrics were equally strong: Daily active users reached 116 million, up 19% year over year, and ARPU climbed to $5.04, reflecting better ad performance and data licensing momentum.

Management guided for an even stronger Q4 with revenue of $655M–$665M (+53–55% y/y) and adjusted EBITDA of $275M–$285M, implying EBITDA growth approaching 80–85% with margins around 42%. Reddit highlighted rapid advertiser adoption, with active advertisers +75% y/y and ad revenue +74% y/y, driven by machine learning improvements, lower-funnel performance tools, and international expansion.

CEO Steve Huffman emphasized Reddit’s differentiated platform, saying the site provides “authentic conversations you can’t find anywhere else.” The company believes it will exit the year with momentum and begin executing on its 2026 strategy focused on user growth, community expansion, traffic diversification, and scaling ad formats.

Reddit Inc. Price and EPS Surprise

Reddit Inc. price-eps-surprise | Reddit Inc. Quote

Estimates Head Higher

Since reporting earnings, analysts have been quick to lift earnings estimates.

For the current quarter, estimates have gone from $0.80 to $0.98 over the last 30 days. For next quarter, we see another big jump, with estimates going to $0.57 from $0.45.

For the current year, estimates have gone from $1.87 to $2.35, a jump of 25%.

The longer-term looks solid as well, with estimates for next year going from $9.16 to $9.55, an increase of 4%.

Analysts continue to raise their expectations following Reddit’s strong results. Citigroup reiterated its Buy rating and increased its price target to $265 from $250, while B. Riley Securities also reaffirmed a Buy and lifted its target to $245 from $235. In addition, Bank of America raised its price target to $210 from $180 while maintaining a Neutral stance.

The Technical Take

RDDT exploded after consolidation post-IPO, moving from $50 to $230. However, the stock fell back under $100 earlier this year. The summer months were kind to RDDT investors, with the stock moving back over $200 and making a high of $282.95 back in September.

The stock has pulled back again, but tested a key support level last week in which it responded very positively.

If we draw a Fibonacci retracement from May lows to September highs, we get a 61.8% retracement support level at $166. The low last week for RDDT was $173 and from there it bounced violently to $213.

With the support line clearly drawn, the stock is trading between some moving average and could consolidate around the $200 level. This is a great spot to be building a position with risk at the 61.8% level, which happens to be the 200-day moving average as well

Let us look at those moving averages  

21-day: $202

50-day: $220

200-day: $166.50

If the bulls can push price over the 50-day MA and the post-earnings highs, the stock should break out.

In Summary

Reddit is showing the kind of growth story investors look for. The company is scaling revenue at a rapid pace, improving profitability, and attracting analysts who continue to raise estimates and price targets.

Users are expanding, monetization is improving, and Reddit is becoming a key data provider in the artificial intelligence economy.

Technically, the stock is holding an important support level and now sits in a healthy consolidation zone, giving patient investors an attractive setup. With earnings estimates moving higher and momentum returning after profit taking, Reddit looks positioned to challenge its prior highs as we head toward year end.

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This article originally published on Zacks Investment Research (zacks.com).

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