Reddit (NYSE:RDDT) posted a strong first quarter earnings report post-listing but a lot of the upside for the stock has already been priced in, analysts at the Bank of America believe.
Q1 revenue of $243 million topped estimates of $212 million, with ad revenue up 39% to $222.7 million, above the expected $199 million.
After surging as much as 17% in afterhours trade following the release of its report on Tuesday evening, the stock traded just 2.2% higher at about $50 at noon on Wednesday.
The analysts awarded the stock a $57 price target and repeated their ‘Neutral’ rating given Reddit’s historically volatile user numbers and revenue and relatively premium valuation.
They said the company’s strong execution in the first quarter will be “hard to duplicate.”
“We are encouraged to see strong post-listing execution and remain constructive on the opportunity ahead for Reddit given its large user base (500 million monthly active users), ongoing language translation, untapped assets for ads and potential upside with new data deals,” they wrote in a note to clients.
“However, Q1 was exceptionally strong for the online ad industry, and we would expect quarterly user and revenue growth volatility based on history.”
Looking ahead at the second quarter, they expect Reddit’s daily active user growth to accelerate by 5 points to 42% year-over-year but see deceleration occurring in the second half of the year on tougher Google traffic comparisons.