Reddit Inc. (NYSE: RDDT), which opened this morning with a double-dose of good news, then lost its entire gain and turned red within an hour.
Morgan Stanley analyst Brian Nowak upgraded today the social network forum to “overweight”. His $200 price target implies another 25% increase from here.
On Monday, the company also launched a new AI-based feature called Reddit Answers.
Its shares are still down by close to 3.0% as of this writing, perhaps due to aggressive profits-taking in the stock of social media that was at one point up 350% from its year-to date low in April.
There’s no other explanation (news, filing or update) to explain the massive sell-off of Reddit shares on Monday.
Why is Morgan Stanley bullish about Reddit stock
Morgan Stanley believes that investors haven’t missed out on Reddit even though the stock has quadrupled in value this year.
Why? Why?
He is convinced that RDDT’s user base will grow next year while maintaining the highest incremental margins in the industry.
Reddit will end the year with a daily active user (DAU) count that is well above its initial expectation for 2024.
Morgan Stanley recommends that you own Reddit shares as its global advertising revenue will exceed $3.0 billion in 2027 due to rapid growth of machine learning and automation.
What we know about Reddit Answers
Reddit Answers aims to help people find answers faster than ever before. It will rely on posts from the platform rather than sourcing answers from the internet at large.
The company is testing a new AI feature on a small group of US users, before rolling it out to broader audiences.
Serkan Piantino, the vice president of Reddit, said in an interview that Reddit Answers was “more about building bridges to the content rather than being a substitute for it.”
According to a press release issued on Monday, the new service will allow users to find answers for all questions except those deemed “not suitable for work”.
Reddit’s stock does not pay a dividend despite its rapid growth.
Should you buy Reddit Shares Today?
Investors may have benefited from the return of Reddit’s stock to its Friday closing price.
Jim Cramer, the famous investor, reiterated on Monday his bullish stance towards RDDT, saying: “Maybe it has been worth $300 for a long time and it was just mispriced.”
Cramer is bullish on Reddit shares because he has great confidence in its chief executive, Steve Huffman.
The New York-listed company also exceeded Street estimates in its third quarter, which ended in October.
This post Reddit stock pares gains despite double dose good news may be updated as new information unfolds.
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