Latest news with #KenGawrelski
Yahoo
2 days ago
- Business
- Yahoo
Should You Buy the Dip on Reddit Stock?
Wall Street sees Google's move to AI-powered search summaries as a threat to Reddit's growth prospects. Reddit said revenue from advertising grew 61% year over year in the first quarter. Positive advertising metrics point to growing engagement from Reddit's 108 million daily active users. 10 stocks we like better than Reddit › After soaring in 2024, shares of Reddit (NYSE: RDDT) are down about 25% in 2025, as of this writing. Reddit has continued to report impressive revenue growth as proof of its appeal to brands in a growing digital advertising market. However, opinions on Wall Street have been mixed lately. This stems from Google's recent shift to artificial intelligence (AI) search summaries. Reddit wants as many visitors to its platform as possible to maximize its appeal to advertisers, but analysts believe Google's AI Overviews and other changes to its search algorithms will remove the need for people to go to Reddit. While investors should be mindful of this threat, there's still good reason to believe Reddit can deliver more growth for investors. Many Reddit users are looking for information on products they're thinking of buying. This is why advertisers continue to increase their spending on the platform -- ad revenue grew 61% year over year to $359 million in the first quarter. But there is a threat from AI models like ChatGPT, Grok, and Google's Gemini, which can summarize all of the information a user needs based on simple search queries. Perplexity already has a deal with Shopify to let users buy products they find using its AI search engine. Google's integration of AI in its search engine could pose a threat to Reddit's dependency on Google Search results to attract users. Wells Fargo analyst Ken Gawrelski downgraded the stock from overweight to equal weight after Reddit's first-quarter earnings report. The analyst believes Google's move toward AI-driven search will likely lead to declines in traffic to Reddit. It's essential for investors to be aware of the challenge these AI models pose to Reddit's business. That said, these models have been around for several years now, and the company is still posting strong user and revenue growth. There is one important advantage Reddit has that AI can't compete with. AI models are very efficient at providing summaries and answers, but it's not the same as interacting with other people. Even while usage of AI models increases, there will still be demand for online social interaction, which AI summaries can't quite replace. Reddit's latest financial report shows people are still highly engaged with the platform and visiting in large numbers. It ended Q1 with over 400 million weekly active users and 108 million daily active users. These users have created over 100,000 communities on the platform. Because many of these people are visiting Reddit to learn about products and services, it makes the platform the perfect vehicle for brands to invest. Average revenue per user grew 23% year over year in the quarter, which signals strong ad performance, improved targeting, and growing appeal of the platform to advertisers. Reddit is even benefiting from the use of its data to train AI models. Its other revenue, including data licensing sales, grew 66% year over year to $34 million. The billions of posts and data it has collected from user interactions provide Reddit with a valuable asset and competitive advantage. These are healthy indicators of a vibrant platform. Investors should be aware of the risks and monitor Reddit's earnings reports for signs of weakening momentum, but this is still a healthy, fast-growing business. The stock's recent dip is a buying opportunity. Before you buy stock in Reddit, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Reddit wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $868,615!* Now, it's worth noting Stock Advisor's total average return is 792% — a market-crushing outperformance compared to 173% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Wells Fargo is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Shopify. The Motley Fool has a disclosure policy. Should You Buy the Dip on Reddit Stock? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
23-05-2025
- Business
- Business Insider
Google's AI Search is ‘Beginning of the End' for Reddit, says Wells Fargo Analyst
Wall Street is growing uncertain on Reddit (RDDT). The social media platform's stock is reeling after a Wells Fargo analyst downgraded it to Hold over concerns of Reddit's long-term traffic and monetization model. The really concerning thing for Reddit investors is that the same analyst had reiterated a bullish position merely two weeks prior. So what changed? Confident Investing Starts Here: Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter The worry stems primarily from Google's (GOOGL) accelerating rollout of AI search tools, which some believe could hinder Reddit's user acquisition and advertising revenue. More specifically, Google's AI-driven approach to obtaining information could replace Reddit's model, making it largely redundant in an AI-powered world. Given Reddit's reliance on logged-out users for traffic, these trends make me bearish on RDDT. Standard Search Under Threat as AI Search Disrupts Organic Traffic We've all done it. When we have a question about something unique, we turn to Google for an answer. Often, the first result is a Reddit post. This is a feature of Google's search algorithm and a testament to Reddit's effectiveness as a source of information in organic search. Of course, the more eyes on Reddit, the more users join its site and become monetizable. This is Reddit's 'bread and butter.' However, Google's development of AI-powered features could threaten Reddit. Google's AI Overviews and AI Mode provide users with direct, summarized answers within search results, removing the need to click on a third-party website like Reddit. Ken Gawrelski from U.S. bank Wells Fargo pointed out that Google's AI advancements threaten Reddit's logged-out user base. While they only contribute around 15% of direct ad revenue, they represent about half of Reddit's user base. Critically, advertising revenue accounts for the vast majority of total revenue. Notably, in its Q1 earnings results, ad revenue was $358.6 million (up 61% year-over-year) and total revenue was $392.4 million. The expected decline in logged-out users caused Wells Fargo to revise its 2026 and 2027 ad revenue forecasts downward by 6% and 14%, respectively. This is no minor change. Beyond AI overviews, Google's newfound emphasis on E-A-T (Expertise, Authoritativeness, Trustworthiness) standards in its algorithm impacts Reddit's organic traffic. Not all anonymous Reddit posters meet these standards, which jeopardize Reddit's visibility in search results. Reddit's Internal Efforts and Data Dilemmas Reddit is aware of existing rends and is actively developing its AI-powered search, otherwise known as 'Reddit Answers.' This integrates into its primary search experience, which aims to retain users who might otherwise turn to external AI tools. There's also a sci-fi element to all this. AI-generated content and bots on the internet pose unique threats to Reddit. The company must work to preserve human interaction, especially as its users are anonymous and AI bots cannot be monetized. Ironically, Reddit's data licensing agreement with Google, reportedly worth around $60 million annually, also threatens the company's ability to keep its users within its ecosystem. While this diversifies Reddit's revenue by providing a high-margin revenue stream, it gives Google the data to strengthen its AI search capabilities. Meanwhile, Reddit is seeing steady growth in Total Daily Active Users, or DAUs. Moving forward, Reddit's ability to maintain growth in DAUs and maximize revenue from each one will be crucial for its success. Notably, Reddit is priced for success. For instance, its stock trades at a price-to-earnings (P/E) ratio of 163, over 6x Meta Platform's (META) stock. This means that investors are paying a sky-high premium for each dollar of Reddit's earnings. To justify the premium, Reddit must meet future growth and profitability expectations. Is Reddit Stock a Good Buy? On Wall Street, Reddit carries a Moderate Buy consensus rating based on 12 Buy, eight Hold, and one Sell ratings in the past three months. Reddit's average stock price target of $149.35 represents a 54% upside potential over the next 12 months. Not everyone is as cautious as Ken Gawrelski. Earlier this month, Citi analyst Ronald Josey issued a Buy rating on RDDT, noting its strong first-quarter performance. Moreover, the analyst is particularly impressed by Reddit's new features, like Reddit Answers, and international growth. Regarding that last point, Reddit posted international revenues of $78.5 million in the first quarter, representing 82% year-over-year growth. Seaport Research analyst Aaron Kessler, who also has a Buy rating on RDDT with a price target of $165, called Reddit a 'long-term opportunity,' citing the social media platform's ability to grow DAUs and monetize growth. The AI Test for Reddit's Long-Term Viability AI advancements have unexpected implications on Reddit. The emerging relevance of AI in search presents a serious problem for Reddit. Moreover, Google's E-A-T standards are squeezing out Reddit content as well. Despite strong revenue and DAU growth, perhaps this is a good time for investors to reevaluate Reddit's prospects, just like the market is currently doing. On the other hand, it's not all bleak. Reddit's proactive development of Reddit Answers could help retain users within its ecosystem. Licensing deals with Google and other AI hyperscalers do provide a high-margin revenue stream in the short term. Finally, Reddit's strong community, growing international presence, and potential for new feature adoption are compelling reasons for long-term optimism. However, for me personally, the combination of a premium stock valuation and trends in Google search is a strong reason for extreme caution.
Yahoo
22-05-2025
- Business
- Yahoo
Why Reddit Stock Was Falling This Week
A downgrade and a spike in Treasury yields pushed Reddit stock lower. One analyst believes Google's push into artificial intelligence (AI) search poses a threat. Reddit has delivered strong results since going public last March. 10 stocks we like better than Reddit › Shares of Reddit (NYSE: RDDT) were sliding this week in response to an analyst downgrade on the social media stock. It fell sharply in the broader sell-off on Wednesday in response to a weak Treasury auction and rising Treasury yields, perhaps reflecting a lack of confidence in the U.S. economy and recessionary fears. According to S&P Global Market Intelligence, the stock was down 11.6% through Thursday at 2:10 p.m. ET. The stock fell 5% on Monday in response to Wells Fargo's downgrade of Reddit stock from overweight to equal weight, with analyst Ken Gawrelski lowering its price target from $168 to $115. The firm called out Alphabet's Google's artificial intelligence (AI) advances and new AI search capabilities, believing that will likely sap Reddit's user growth, especially from logged-out users, which Gawrelski believes Reddit will need to maintain its strong growth rate. Additionally, the analyst said its data licensing business is incompatible with the long-term growth of the business, as it will leverage Reddit's knowledge base elsewhere. On Wednesday, the stock tumbled again in line with the broader sell-off, losing 9.3% as growth stocks like Reddit are especially sensitive to rising interest rates and broader threats to the economy. The social media stock has delivered strong results in a little over a year since it went public, driving strong user growth and ad revenue growth, and its AI-based data licensing business still appears to have a bright future. Reddit has a unique and massive "corpus" of content on a wide range of topics, and it's more than a search hub, as users go there to get advice or feedback from other people, which is different from using an AI chatbot. The company will have to continue delivering strong growth and improve its profitability, but one downgrade shouldn't shake investor confidence in the business. Before you buy stock in Reddit, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Reddit wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $644,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $807,814!* Now, it's worth noting Stock Advisor's total average return is 962% — a market-crushing outperformance compared to 169% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Wells Fargo is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Wells Fargo. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy. Why Reddit Stock Was Falling This Week was originally published by The Motley Fool Sign in to access your portfolio
Globe and Mail
22-05-2025
- Business
- Globe and Mail
Why Reddit Stock Was Falling This Week
Shares of Reddit (NYSE: RDDT) were sliding this week in response to an analyst downgrade on the social media stock. It fell sharply in the broader sell-off on Wednesday in response to a weak Treasury auction and rising Treasury yields, perhaps reflecting a lack of confidence in the U.S. economy and recessionary fears. According to S&P Global Market Intelligence, the stock was down 11.6% through Thursday at 2:10 p.m. ET. Reddit faces a new threat The stock fell 5% on Monday in response to Wells Fargo 's downgrade of Reddit stock from overweight to equal weight, with analyst Ken Gawrelski lowering its price target from $168 to $115. The firm called out Alphabet 's Google's artificial intelligence (AI) advances and new AI search capabilities, believing that will likely sap Reddit's user growth, especially from logged-out users, which Gawrelski believes Reddit will need to maintain its strong growth rate. Additionally, the analyst said its data licensing business is incompatible with the long-term growth of the business, as it will leverage Reddit's knowledge base elsewhere. On Wednesday, the stock tumbled again in line with the broader sell-off, losing 9.3% as growth stocks like Reddit are especially sensitive to rising interest rates and broader threats to the economy. What's next for Reddit? The social media stock has delivered strong results in a little over a year since it went public, driving strong user growth and ad revenue growth, and its AI-based data licensing business still appears to have a bright future. Reddit has a unique and massive "corpus" of content on a wide range of topics, and it's more than a search hub, as users go there to get advice or feedback from other people, which is different from using an AI chatbot. The company will have to continue delivering strong growth and improve its profitability, but one downgrade shouldn't shake investor confidence in the business. Should you invest $1,000 in Reddit right now? Before you buy stock in Reddit, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Reddit wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $644,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $807,814!* Now, it's worth noting Stock Advisor 's total average return is962% — a market-crushing outperformance compared to169%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Wells Fargo is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Wells Fargo. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
CNBC
01-05-2025
- Business
- CNBC
Meta posted a solid earnings beat for the first quarter. Here's how analysts reacted
After Meta 's stronger-than-expected earnings report, Wall Street is looking at the path ahead for the social media giant. The Facebook and Instagram parent said it earned $6.43 per share on revenues of $42.31 billion in the first quarter. Analysts polled by LSEG expected $5.28 per share and $41.40 billion in revenue. Meta gave a second-quarter sales outlook that was in line with consensus estimates. Also of note, Meta's Reality Labs hardware division posted a smaller operating loss than Wall Street expected. Shares rallied more than 6% before the bell on Thursday. That marks a turn for the Big Tech stock, whose shares have slid more than 6% so far in 2025. The lion's share of analysts polled by LSEG have buy ratings on the stock. Following the report, CNBC Pro compiled some of the key takeaways by major firms: Citi Analyst Ronald Josey reiterated his buy rating. He also hiked his price target from $655 to $690, which now reflects 25.7% upside over Wednesday's close. "Key here is that Meta's adv. demand trends appear to be relatively healthy and while we're watching for any impacts from macro and lower spend from China-based advertisers given the de minimis change, Meta's scale of users and advertisers + focus on newer products are offsetting some macro challenges." Wells Fargo Analyst Ken Gawrelski has an overweight rating. Gawrelski slashed his price target from $752 to $664, but that still suggests upside of 20.9%. "Very solid ad trends through April, w/ 2Q revenue guide above fears. Keeping its foot on the pedal, Meta accelerates CapEx spend for FY25. Expect market to increasingly demand tangible signs of ROI, most notably in form of higher '26 revenue growth." Goldman Sachs Analyst Eric Sheridan has a buy rating and price target of $690, implying the stock can rally 25.7%. "Against investor debates about the health of the macroeconomic environment, META mgmt framed its one quarter forward revenue commentary as based on market and advertiser signal to date but with open questions likely remaining for investors on geographic exposure, category exposure and how changed demand trends might be reflected into ad budget allocation in the coming quarters." JPMorgan Analyst Doug Anmuth has an overweight rating. Anmuth upped his price target by $65 to $675, which means the stock can jump 23% in the next year. "We know it's not that easy to execute so well & deliver strong growth off a big base. But we believe Meta is keenly aware that with strong execution & AI transparency, it will get a longer leash from the Street on AI investments, specifically capex. We continue to believe that Meta is well positioned for a tougher macro environment given its scaled advertiser base, highly performant platform, & vertical agnostic inventory. While Meta is certainly not immune, depth of slowdown will ultimately determine Meta's degree of resilience." Morgan Stanley Analyst Brian Nowak has an overweight rating on the stock. Nowak increased his target price from $615 to $650, which now suggests 18.4% in upside. "Big picture, we believe META's leading global reach, best in class and still improving ad product and relative ROI are delivering results. We also believe its cohort based audience bidding design among its vertically agnostic advertiser base is set to provide more support and density in the auction market if there is a macro pullback." Bernstein Buy-rated analyst Mark Shmulik has a $700 price target, which projects a surge of 27.5%. "Meta has been busy playing dodgeball. The company is busy diving out of the way of changing advertiser behavior tied to tariffs and consumer spending, trying to duck emerging regulatory curveballs out of Europe and the US, and dodging margin compression by reigning in full year expenses. The offense seems to be clicking too, throwing fastballs on ad tech and engagement improvements, launching new products across Threads ads, Meta AI, and Edits apps, and long distance throws on Business Messaging and Wearables. The catch is that it's expensive to fiend a winning Dodgeball team with CAPEX going up. The game is still ongoing, but it looks like Meta is winning."
