Wall Street starts rating Reddit's stock

Wall Street analysts are initiating their coverage of Reddit (RDDT) after the social media platform went public at the end of March. Analysts have differing opinions, with a mix of Buy and Neutral ratings on the stock.

Yahoo Finance's Madison Mills and Josh Schafer discuss Wall Street's take on Reddit.

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This post was written by Stephanie Mikulich.

Video Transcript

MADISON MILLS: We ought to talk about Reddit because we have a slew of investment banks initiating coverage on that name today. We have Needham rating Reddit as a buy with a target price of $55. We also have Deutsche Bank giving the stock a buy rating with a $50 price target. But not all firms are bullish on this stock. We have Goldman and JP Morgan, both placing the equivalent of a neutral rating on Reddit as valuation in the path to monetization still remain a concern for this name.

Josh, I know that you have spent a lot of time covering what's going on with Reddit and the IPO. What are your sources telling you about it?

JOSH SCHAFER: Yeah. So I mean, the stock is back at about $41 now. So it's sort of out of the range that a lot of people were concerned with when you saw that big surge in Reddit right out of the gate, right? Reddit shares were up over $70. And I think there was a lot of hesitation from investors of just, oh wow, everyone sort of bought the AI trade here instantly. And while there may be AI upside, AI upside is not coming in this first quarterly earnings report, right? And so it's going to take a little bit of time.

I think that was something interesting looking through some of the different Wall Street research that was released today as these firms initiate coverage on the stock. A lot of people talking about the Gen AI upside, right? And sort of that is the value prop here. That is going to be the growth metric to watch is how can they monetize that.

And it seems like right now, people just have a little bit of differing opinions, if you will, on whether or not that's going to happen. Because for now, Reddit isn't really monetizing AI at a high clip. Most of their money is coming from advertising.

MADISON MILLS: It's a really good point. And I finally got on Reddit, by the way. So I feel like--

JOSH SCHAFER: Oh, you got to check it out.

MADISON MILLS: --I'm helping the stock, of course.

JOSH SCHAFER: Yes.