Why Reddit Stock Crushed It in December

Several positive analyst moves added up to a tailwind, pushing Reddit's (NYSE: RDDT) share price up notably in the final month of 2024. December saw the social media company's already hot stock rise by more than 16%, bolstering its status as one of the best-performing titles of the year.

Impressing investors and pundits alike

Reddit is one of the newer tech and social media stocks on the scene. It arrived on the market less than a year ago (in March 2024, to be exact, after completing its initial public offering, or IPO). Given that newness and its near-instant popularity as an investment, several researchers have only recently started tracking the stock.

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Two prominent ones initiated Reddit coverage in December, both with rather positive evaluations. The first was big four bank Wells Fargo, which rates it overweight (i.e., a buy) at a price target of $206 per share. No. 2 was Guggenheim, whose analyst Michael Morris also tagged the company as a buy at a slightly higher ($210 per share) fair value assessment.

According to reports, Morris feels that Reddit will benefit from general growth in social media usage. It also has excellent potential to boost its ad revenue and will have opportunities to earn more coin from activities such as data licensing.

This optimism feels justified to me. Reddit's revenue growth trajectory has been particularly impressive, with the company managing to increase this rate in each of the three quarters in 2024 reported thus far (at 48%, 54%, and 68%, sequentially). The count of daily average "uniques" (read "users"), an important operational metric, continued to rise at rates well in the double-digit percentages.

Also, somewhat atypically for a tech stock, Reddit has been profitable lately. It booked a generally accepted accounting principles (GAAP) net income of just under $30 million in its most recently reported frame, following two straight quarters of losses.

Some bulls became more bullish

That kind of performance isn't escaping the notice of the researchers already following Reddit's fortunes. Several analysts from influential companies became notably more optimistic on the stock in December, helping support the bull case for buying it.

Among these were white-shoe investment bank Morgan Stanley, whose analyst Brian Nowak upgraded his recommendation to overweight at a price target of $200 per share. He had previously categorized it as equalweight (hold). According to reports, his reasoning was similar to that of Guggenheim's Morris.

Meanwhile, Ronald Josey of Citigroup enacted a drastic price target raise on Reddit to $200 per share from his preceding $120. As that price level matches that of Morgan Stanley's Nowak, Josey also rates Reddit a buy.

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Wells Fargo is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.