Reddit Stock Gains as Jefferies Forecasts Q2 Upside on Ad Strength

Reddit shares (NYSE:RDDT) gained in premarket trading Monday after analysts at Jefferies highlighted strong advertising momentum and user growth, suggesting the company is positioned for a potential second-quarter earnings beat.

The stock rose 0.7% in premarket activity, outperforming the broader market as Nasdaq futures concurrently fell by 0.5%, according to the source.

Analyst's Bullish Outlook

In a note to clients, Jefferies said its analysis points to a second-quarter upside for Reddit based on strong advertising checks, stable traffic growth, and positive feedback on the company's efforts to boost user engagement.

The firm's advertising checks indicate that Reddit continued to gain market share from mid-sized social media peers such as LinkedIn, Pinterest, Snap, and X. Analysts also noted that a broader acceleration in digital ad spending during the quarter likely provided an additional tailwind for the company.

Key Metrics and Projections

Jefferies' research highlighted several positive data points supporting its thesis. The firm projects Reddit's second-quarter revenue will grow 47% year-over-year, driven primarily by an increase in average revenue per user (ARPU).

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Key observations from the analyst note include:

• User Traffic: Total web daily active user (DAU) growth improved to 16% year-over-year in the second quarter, up from 15% in the first quarter.
• ARPU Opportunity: The firm sees significant room for growth, noting that Reddit's ARPU in the U.S. remains at an approximate 70% discount compared to its peers.
• Adoption: Continued innovation in ad formats, targeting, and automation is expected to support greater advertiser spending on the platform.

Investor Expectations

According to Jefferies, conversations with investors suggest the market is looking for Reddit to report strong results. The firm stated that investors anticipate revenue to be a mid-single-digit percentage above consensus estimates, with adjusted EBITDA potentially beating forecasts by a low-double-digit percentage.

Looking ahead, investors will also focus on third-quarter guidance, which is expected to exceed consensus. User growth remains a key debate, with the market watching for a sequential increase in net additions of U.S. logged-in DAUs, which was 200,000 in the first quarter.