After a massive surge on Tuesday, Reddit stock continued its upward momentum in the early hours of trading on Wednesday.
The RDDT stock surged up over 11% to hit an intraday high of $136.47. The stock has moderated after the initial surge and was up around 4% at the time of writing.
This comes as Raymond James revised its outlook on Reddit on Wednesday, lowering its price target from $250.00 to $200.00 while maintaining a “strong buy” rating on the RDDT stock.
Analyst Josh Beck explained that Reddit’s user base—exceeding 500 million monthly active users—remains a major asset, with top subreddits attracting more than 20 million members.
Why Reddit should not fear AI disruption?
He emphasized that Reddit’s curated, human-driven discussions are likely to complement rather than be disrupted by AI advancements and vertical search technologies.
The platform’s strong gross profit margins of 90.5% further reinforce its monetization potential.
Beck cited recent industry data that highlighted the scale of search demand.
Google reports roughly 5 trillion queries per year, translating to about 15 billion daily searches, while Microsoft has previously estimated 10 billion daily searches.
This suggests a mid-teens compound annual growth rate (CAGR) in search activity over the past few years.
Additionally, the rise of AI-powered tools such as ChatGPT—which logs around 4 billion monthly visits, according to SimilarWeb—signals that search and chat functionalities are expanding rather than cannibalizing each other.
Despite the emergence of alternative search tools, Google continues to hold a dominant market share in the high-80% to low-90% range, indicating that the overall market is growing rather than established players losing ground.
Beck acknowledged Reddit’s recent daily active user query (DAUq) miss as a temporary issue.
Since 2022, Google’s search team has structurally endorsed content like reviews and discussions, which has been well received by users.
Beck believes this endorsement remains intact, reinforcing Reddit’s role in the evolving search ecosystem.
Loop Capital also remains bullish on RDDT
Earlier this week, Loop Capital analyst Alan Gould also weighed in on Reddit’s trajectory.
While acknowledging a decline in user numbers following a Google search algorithm change, Gould maintained that Reddit’s fundamentals remain strong.
He pointed to the company’s 71% year-over-year sales growth in the fourth quarter—its fastest pace since 2022—as a sign of its resilience.
Gould also highlighted Reddit’s improved advertising tools and data licensing opportunities as key drivers of future growth.
He noted that the company’s stock had surged nearly sevenfold since its IPO before its recent decline, attributing this performance to its ability to “wildly” exceed 2024 estimates.
RDDT shares have crashed heavily from the all-time high of $230 in February. In just the last five sessions, the stock has slumped around 20%.
Despite current market uncertainty, he argued that Reddit remains an attractive long-term investment opportunity.
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