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Reddit’s Unique Approach to Earnings Report
Reddit is set to report its earnings after the bell tomorrow, marking an unusual occasion where the company will be fielding questions directly from its own users. This innovative move allows Redditors to post their inquiries in the subreddit r/RDDT, with the company planning to address them during the question and answer segment of its first quarter earnings call with investors.
Embracing User Engagement
Emphasizing user engagement, Reddit made headlines earlier by reserving 8% of its IPO shares for its most dedicated Redditors, without imposing any lock-up period. This gesture aimed to involve the community in the company’s public debut and foster a sense of ownership among its loyal users.
Analyst Assessments
Raymond James analyst Josh Beck has reaffirmed his strong buy rating for Reddit’s stock in anticipation of the forthcoming earnings report, citing positive user trends and the growing demand for data to fuel generative AI models. Meanwhile, Bank of America analysts have issued a neutral rating but project a significant 30% revenue increase in Reddit’s first quarter compared to the previous year, emphasizing the impact of the company’s data licensing agreement with Google.
Despite Reddit’s shares closing at nearly $49 on Monday, surpassing its IPO price of $34, they remain below the stock’s all-time high of approximately $75 achieved shortly after its public debut. Notably, Reddit has yet to turn a profit since its inception in 2005, with a reported loss of $91 million in 2023, as outlined in the company’s IPO filing with the Securities and Exchange Commission.
Progress Towards Profitability
Nevertheless, there are signs of improvement as Reddit’s total losses decreased by 43% from 2022 to 2023, coinciding with the introduction of fees for third-party developers utilizing its application programming interface (API). While this decision sparked some backlash among Redditors, it ultimately had a limited impact as Reddit’s sales surged by approximately 21% to reach $804 million last year.
Further Insights into Reddit
Another intriguing aspect of Reddit’s operations is the compensation of its CEO, Steve Huffman, whose earnings surpass those of the leaders of Meta, Pinterest, and Snap combined. This financial detail sheds light on the unique dynamics within Reddit’s corporate structure and executive remuneration practices.
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