Anticipated Market Reaction to Earnings from Reddit Stocks May Be Volatile Among Options Traders
Time to Hear the Numbers: Reddit is gearing up to reveal its Q1 2025 earnings on May 1st, with the market anxiously waiting to see how the social media giant fares during this turbulent time. The stock has taken a beating, plummeting 28.6% since the start of the year.
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Despite its relatively recent presence on Wall Street, Reddit is attempting to hold its ground above its newly formed 200-day moving average. The stock has managed to close four straight days above this trendline ahead of the earnings report.
Wall Street's Forecast for Reddit's EarningsThe experts expect Reddit's Q1 revenues to range between $360-370 million, representing a jaw-dropping 48-52% year-over-year growth. However, earnings per share are anticipated to be modest at $0.03, marking a significant 90% decline from the previous year. But don't count them out just yet, Reddit reported robust growth in the Q4 2024 with a revenue surge of 71% and stellar international ad performance.
As of Q4 2024, Reddit boasted a user base of 101.7 million daily active unique users, although growth in this metric fell slightly short of analysts' expectations. The platform has been aggressively expanding its offerings, like the AI-powered "Reddit Answers" interface, and forming partnerships with industry giants such as Google and OpenAI.
Risks Ahead for RedditDespite its impressive growth, Reddit faces some serious challenges. Competition from Snap's expanding ad features, potential impacts from EU privacy regulations, and the current economic environment are all major factors that could harm the platform's success. U.S. GDP contracted in Q1, raising concerns over digital ad spend, especially from Chinese advertisers.
Moreover, Reddit's valuation metrics appear to be stretched, with a forward 12-month price/sales ratio of 12.54X far surpassing the industry average, suggesting possible overvaluation despite the recent stock price slide. Recurring platform instability, including a global outage, has also added to operational concerns.
Expectations for Reddit's Earnings ReportThe earnings report will be crucial for evaluating Reddit's growth trajectory. Analysts remain optimistic about the company's future, predicting revenues to reach $3.5 billion by 2028, up from $1.3 billion in 2024. However, the near-term stock performance will likely hinge on the earnings report, broader market sentiment, and the company's ability to navigate these challenges effectively.
Options traders anticipate a post-earnings move of just over 12% for RDDT stock, attributable to the at-the-money straddle expiring May 2. In the past, the stock has exhibited a more dramatic move of 14.52% in either direction following its last four earnings announcements.
This article was generated with the collaboration of AI and was reviewed by an editor. On the date of publication, the editor had no positions in any of the securities mentioned in this article. All information and data in this article serve only informational purposes. For more information, please see our Disclosure Policy.
Insights: Analysts present conflicting expectations for Reddit's Q1 2025 earnings, with differing EPS estimates across sources. The Seeking Alpha $0.51 EPS estimate stands in stark contrast to Nasdaq's $0.03 projection, potentially indicating reporting errors or different methodologies. Investors should keep a close eye on the earnings call on May 1st for more clarity on Reddit's revenue growth, AI-driven ad revenue, and user engagement metrics.
- The market is anxiously waiting to see how Reddit's earnings in Q1 2025 will reflect the stability of the social media giant amidst the turbulent economy, as they are projected to mention a significant 48-52% year-over-year revenue growth but a more modest 90% decline in earnings per share.
- Despite the technology sector's challenges in the current climate, Reddit's attempts to maintain its general-news platform's growth are supported by robust Q4 2024 financials, including a revenue surge of 71% and strong international ad performance.
- Analysts expect Reddit's revenue to reach $3.5 billion by 2028, but the near-term stock performance may depend on the earnings report's clarity about the company's growth trajectory, strategic AI offerings, and user engagement metrics.
