Loop Capital lowers Reddit stock price target on user growth concerns
Investing.com
Published Jun 12, 2025 10:55AM ET
Loop Capital lowered its price target on Reddit (NYSE:RDDT) to $200 from $210 on Thursday while maintaining a Buy rating on the social media platform's shares. Currently trading at $115.1, the company maintains impressive gross profit margins of 90.82% and shows strong revenue growth of 64.12% over the last twelve months. The adjustment comes as Reddit faces moderating year-over-year user growth in the second quarter due to challenging comparisons. According to InvestingPro , the stock currently appears overvalued based on its Fair Value analysis.
Despite the slowdown, Loop Capital projects 80% two-year stacked growth, similar to first-quarter performance, and expects EBITDA to exceed the high end of guidance again this quarter. The firm slightly increased its 2025 and future-year forecasts for the company. InvestingPro analysis reveals 15+ additional investment insights for Reddit, including detailed growth projections and financial health metrics.
Reddit's long-term outlook remains positive, with Loop Capital projecting the platform could double its user base to 200 million daily active users by 2029. Under the firm's base case, Reddit could reach $4.5 billion in revenue by that year, with potential for $7.6 billion in a bull case scenario that would match Twitter's historic average revenue per user performance.
The social media company is diversifying its traffic sources through brand marketing tests, exploring partnerships with external websites, and considering performance-driven ad spending. Current visibility on Google (NASDAQ:GOOGL) search remains at an all-time high, according to the research note.
Reddit recently sued Anthropic for breach of contract over alleged unauthorized content scraping, and is working to verify user authenticity to protect human-to-human interactions that form the core of its value proposition.
In other recent news, Reddit has reported a slowdown in user growth for the third consecutive month, as noted by Piper Sandler. The platform's audience fell by 6 million users in May, with ad units contributing significantly to this decline. Despite these challenges, Piper Sandler highlighted a strengthening digital advertising market, projecting a 6.3% year-over-year growth for the second quarter of 2025. Additionally, Reddit is undergoing a significant leadership change with Chief Product Officer Pali Bhat set to depart, with interim responsibilities being managed by existing executives. Meanwhile, Reddit has filed a lawsuit against AI firm Anthropic for unauthorized use of its user data, alleging breach of contract and unlawful business practices.
RBC Capital recently initiated coverage on Reddit with a Sector Perform rating and a $125 price target, emphasizing cautious optimism about the company's revenue growth potential. The firm pointed out the risks associated with Reddit's traffic sources but noted potential benefits from increased user engagement and advertising revenue. Cannonball Research maintained a Buy rating with a $244 target, expressing confidence in Reddit's long-term monetization strategy and new ecommerce feature, Dynamic Product Ads. They anticipate that as this feature gains traction, it could lead to positive financial outcomes and potential upward revisions in earnings estimates.
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Written By: Investing.com
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