Citi maintains Buy rating on Reddit stock ahead of Q2 earnings

Citi has reiterated its Buy rating and $163 price target on Reddit (RDDT) ahead of its Q2 2025 earnings release on July 31, anticipating results to exceed consensus based on strong advertiser checks and robust fundamentals including 64% revenue growth and 90.8% gross margins. Analysts are closely monitoring daily active user (DAU) trends, with third-party data indicating traffic stabilization in July. Other firms like Wells Fargo ($118 target), Citizens JMP ($180 target), and Baird ($151 target) have also raised price targets, citing stabilizing advertising trends, user growth, and the launch of AI-powered ad tools, collectively reinforcing a positive outlook on Reddit's early monetization journey and strategic data assets.

Analysis

Ahead of its Q2 2025 earnings report, Reddit (RDDT) is benefiting from strong positive sentiment from Wall Street, led by Citi's reiteration of its Buy rating and a $163 price target. This outlook is supported by robust fundamentals, including 64% revenue growth and 90.8% gross margins over the last twelve months, with Citi's proprietary advertiser checks indicating a high probability of beating consensus estimates. A key area of concern for investors, daily active user (DAU) trends following Google algorithm changes, appears to be mitigating, as third-party data suggests traffic stabilized in July. This bullish view is not isolated; Wells Fargo, Citizens JMP, and Baird have all recently raised their price targets, citing stabilizing advertising trends and increased user engagement. The strategic narrative centers on Reddit being in the "early days on its product and monetization journey," with the recent launch of AI-powered ad tools seen as a crucial step in leveraging its data corpus, which analysts view as a "core strategic asset."

Key Decisions for Investors

• Investors should closely monitor the upcoming Q2 earnings release on July 31, focusing on official daily active user (DAU) figures to confirm the stabilization suggested by third-party data, as well as revenue and adjusted EBITDA relative to expectations.
• Given the broad-based analyst upgrades and strong underlying growth metrics, initiating or adding to a position ahead of the report could be considered, though it carries the risk of a post-earnings sell-off if guidance for Q3 disappoints.
• Evaluate management's commentary on the early performance and adoption of its new AI-powered ad tools, as progress in this area is fundamental to the long-term thesis that Reddit can successfully monetize its unique data assets and user base.