Reddit stock jumps 40% on surprise profit, buoyant outlook

Reddit ( RDDT ) shares rose Wednesday after the social media company posted its first-quarter earnings as a public company with better-than-estimated results and a rosy outlook for the fourth quarter.

Reddit, which went public on the New York Stock Exchange (NYSE) in March, had third-quarter revenue of $348.4 million, up 68% from a year ago and surpassing the $312.2 million that analysts had expected from Visible Alpha. It reported a third-quarter net profit of $29.9 million, or 16 cents a share, against estimates of a net loss of $17.7 million, or 10 cents a share.

For the fourth quarter, Reddit expects revenue in the range of $385 million to $400 million and adjusted EBITDA of $110 million to $125 million.

The news sent the stock up more than 40% in recent trading. Shares have more than doubled since they began trading, and at levels near $115, they are well above their $34 IPO price.

“It was another strong quarter for Reddit and our community as we hit key milestones, including new levels of user traffic, revenue growth and profitability,” said Chief Executive Officer (CEO) Steve Huffman.

Citi notes an increase in revenue due to advertising growth

Citigroup analysts, who have a “buy” rating on the stock, noted that ad revenue growth of 56% drove the higher-than-estimated sales jump.

“Ad revenue was driven by growth in impressions delivered from higher-growth users, more effective ad load and expansion of conversational placement ads,” Citi said.

JPMorgan analysts raised their price target on the stock to $110 from $77, although they maintained a “neutral” rating.

UPDATE: This article has been updated since it was first published to reflect more recent stock price information.