Jim Cramer Recommends Buying Reddit Stock
CNBC's Jim Cramer told viewers to buy Reddit stock, citing its $29 billion valuation and potential acquisition appeal.
CNBC host Jim Cramer has issued a buy recommendation for Reddit, Inc. (NYSE: RDDT). During the September 17 episode of 'Mad Money,' Cramer responded to a caller's question about the stock's recent performance by stating his bullish view.
Cramer argued that Reddit, valued at around $29 billion, is an attractive target. He suggested other companies might pay $40 billion for its user base alone. "Buy Reddit, period, end of story," Cramer said.
Strong Quarterly Financials
The recommendation follows Reddit's recently reported second-quarter financial results. The figures show substantial growth across key metrics, providing a foundation for the bullish argument.
| Metric | Q2 Performance |
|---|---|
| Revenue | $805 million (up 61% year-over-year) |
| Advertising Revenue | $762 million (up 64% year-over-year) |
| Adjusted EBITDA | $343 million (more than doubled) |
| Daily Active Uniques | 130.3 million (up 18%) |
| Weekly Active Uniques | 514.6 million (up 24%) |
The company also provided an optimistic forecast for the current quarter. It expects third-quarter revenue between $860 million and $870 million. Adjusted EBITDA is projected to be between $385 million and $395 million.
CEO Steve Huffman discussed the company's strategy at the Goldman Sachs Communacopia + Technology Conference on September 8. He emphasized the importance of growing Reddit's direct user base. "What is most valuable to Reddit is bringing users into the Reddit ecosystem," Huffman stated. The company is actively working to convert mobile-web visitors into app users.
Risks and Valuation Concerns
Despite the growth, some risks are evident in the user data. The composition of user growth shows a divergence between U.S. And international markets.
U.S. Daily active unique users grew 6% year-over-year to 53.2 million. However, logged-in U.S. Daily active uniques saw only a 1% increase, reaching 23.1 million. International daily active uniques grew much faster, rising 28% to 77.1 million.
The revenue generated per user also varies significantly. In the second quarter, the average revenue per unique user was $11.85 in the U.S. Internationally, the figure was just $2.26. Huffman acknowledged that traffic that is logged out or transient is just less meaningful to us.
Valuation presents another consideration for investors. Reddit's stock closed at $152.83 on September 17, giving it a market capitalization of approximately $29.4 billion. Its forward price-to-earnings ratio stood at 23.31.
The company is making significant investments in its core product. Huffman admitted that Reddit's feed technology is roughly 12 to 18 months behind the current state of the art. Improving this feed is a top priority for the company over the next year to 18 months.
