BofA Securities raises Reddit stock price target to $180 on strong execution

Reddit (RDDT) has garnered multiple analyst price target increases following its robust Q2 2025 results, which significantly surpassed expectations with $0.45 EPS and $500 million in revenue, driven by accelerating 84% year-over-year advertising growth. BofA Securities raised its price target to $180 while maintaining a Neutral rating, citing strong execution and advertiser adoption but highlighting concerns over its premium valuation at 13x 2026 price-to-sales and potential user traffic volatility from Google AI changes. Other firms like Citizens JMP and Goldman Sachs also increased their targets to $225 and $212 respectively, reflecting Reddit's strong revenue momentum despite some lingering valuation and user growth scrutiny.

Analysis

Reddit (RDDT) is demonstrating significant operational momentum, underscored by its second-quarter 2025 financial results which substantially surpassed market expectations. The company reported earnings per share of $0.45, more than double the forecasted $0.19, on revenue of $500 million. This performance was driven by an acceleration in advertising revenue, which grew 84% year-over-year. Consequently, revenue and EBITDA exceeded the high end of guidance by $70 million and $37 million, respectively. This strong execution has led multiple analyst firms, including BofA Securities, Citizens JMP, and Goldman Sachs, to increase their price targets to $180, $225, and $212, respectively. However, a note of caution persists, primarily articulated by BofA and Goldman Sachs, which both maintain Neutral ratings. The core concern is valuation; the stock is trading at a premium 13x 2026 price-to-sales ratio, a steep multiple compared to the 5x average for its competitors. Additional risks cited include the limited scale and decelerating growth of its logged-in daily active users (23 million in the US) and potential revenue volatility tied to traffic from Google's evolving AI search algorithms.

Key Decisions for Investors

• Given the accelerating 84% year-over-year advertising revenue growth and significant earnings beat, momentum-focused investors might consider the stock's strong execution as a positive signal for continued outperformance.
• Investors should be cautious of the premium valuation, as Reddit's 13x 2026 price-to-sales ratio is significantly higher than the 5x multiple of its peers, potentially capping upside or increasing downside risk.
• It is critical to monitor key risk factors, including any further deceleration in daily active user growth and the potential impact of Google's AI-driven search changes on user traffic and revenue stability.