Increased advertising spend gives Reddit a leg up over its peers, according to Morgan Stanley. The bank upgraded shares of the social media platform to overweight from equal weight. It also hiked its price target to $200 from $70. This updated forecast is nearly 23% above where shares closed on Friday. RDDT YTD mountain RDDT YTD chart Morgan Stanley has stayed on the sidelines with Reddit during the year, which analyst Brian Nowak acknowledged as a mistake. The company has skyrocketed since its initial public offering in March, up more than 378%. Reddit priced its IPO at $34 per share. The stock closed at $162.76 on Friday. But while Nowak missed out on Reddit’s surge, he thinks the platform has yet to reach its full potential. “As we look ahead to ’25, we don’t think we have fully missed this scaling platform that is rapidly shipping its pipeline of engagement and advertising initiatives,” the analyst wrote. “Looking ahead, we see user and time spent per user growing, ad pricing rising (as advertisers pay for improving performance) and upside to ad load as well. This leads to ~35% ’24-’27 US Ad revenue growth … which is 2X-6X faster than peers.” Nowak also expects ad spending to increase with Reddit’s technological adoption, which includes machine learning modeling and end-to-end automation. He added that Reddit’s U.S. ad unit pricing remains around 50% lower than that of its peers. “This, combined with more engagement and expected improved ad offerings ahead showcases the multiple levers RDDT has to pull to drive growth, while also keeping advertiser return on ad spend high,” the analyst added. If Reddit achieves profitability in 2025, as Nowak predicts, the company could be on the path for inclusion into an S & P index, the analyst said. This would lead to greater passive fund flows, which could also benefit the stock. Analysts are mostly bullish on Reddit. LSEG data shows 11 of the 17 who cover the stock rate it as a buy or a strong buy, while the remaining six have hold or sell ratings on it.
