Reddit's results are on deck. Analysts expect ad strength and growth in online spending.

MW Reddit's results are on deck. Analysts expect ad strength and growth in online spending.

By James Rogers

Reddit reports its third quarterly results as a public company after market close Tuesday

Reddit Inc. reports its third quarterly results as a public company after market close on Tuesday amid expectations of ad strength and healthy online spending growth.

Earlier this month, J.P. Morgan raised its price target for Reddit (RDDT) to $77, citing ad strength driven by solid macroeconomic trends and improvements to the company's platform and ad technology. Raymond James maintained its neutral rating for Reddit.

In a recent note, analyst firm Baird wrote that, for now, online spending growth seems OK. "Our checks suggest fairly steady e-commerce growth in the U.S.," analyst Colin Sebastian wrote in the note. Online advertising checks were fine, according to Baird, which cited some expected deceleration in year-over-year growth but broader trends that are still benefiting Alphabet Inc. $(GOOGL)$, Meta Platforms Inc. $(META)$ and a few "second-tier" platforms such as TikTok, Pinterest Inc. $(PINS)$ and Reddit.

Related: Reddit's stock climbs after Jefferies initiates coverage with a buy rating

"While there could be some implied event-driven caution in [fourth-quarter] outlooks (elections, job losses, supply chain, compressed holiday shopping, consumer debt, etc), our conversations with industry contacts still suggest optimism about near-term growth," Sebastian wrote.

Earlier this month, Jefferies initiated coverage of Reddit with a buy rating. Jefferies estimated that Reddit's earnings before interest, taxes, depreciation and amortization will more than double in the next two years to around $450 million.

Of 19 analysts surveyed by FactSet, 12 have an overweight or buy rating, six have a hold rating and one has an underweight rating for Reddit.

Related: Reddit extends machine-learning translation to 35 new countries, including Brazil and Spain

In May, Reddit's first quarterly results as a public company sent the company's stock surging on better-than-expected revenue and a narrower-than-expected loss.

In its second quarterly results in August, Reddit reported better-than-expected revenue and a narrower-than-expected loss, as well as sales guidance that surpassed Wall Street's expectations.

Analysts surveyed by FactSet are looking for a third-quarter loss of 7 cents a share and sales of $314 million.

Related: Reddit's stock rises on new partnership with NFL, NBA, MLB, PGA Tour and NASCAR

Reddit's stock is up 60.9% since the company's initial public offering in March, outpacing the S&P 500 index's SPX 11.3% gain over the same period.

-James Rogers

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October 28, 2024 14:50 ET (18:50 GMT)

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