Why Reddit Stock Skyrocketed This Week

Key Points

• Reddit reported its second-quarter results on July 31, and the stock has been on a tear since then.
• Reddit's sales and earnings are rising rapidly.
• Data licensing for artificial intelligence models has turned into a powerful growth driver for Reddit.
• 10 stocks we like better than Reddit ›

Reddit (NYSE: RDDT) stock continued to rocket higher in this week's trading thanks to strong quarterly results. The social media player's price rose 14.2% over the last week of trading.

Reddit published its second-quarter report on July 31, and the results spurred a surge in bullish momentum that extended into this week's trading. The company's share price is now up roughly 308% over the last year of trading.

Image source: Getty Images. ## Reddit stock roars higher on big Q2 beats

Reddit's second-quarter report arrived with results that caused investors to adopt a far more bullish stance on the company's outlook. In Q2, Reddit reported a profit of $0.45 per share on sales of $500 million. The performance came in far better than the average analyst estimate, which had targeted earnings per share of $0.19 and revenue of $426 million.

The company's sales increased 78% year over year in the period, and the strong performance beats caused a wide range of Wall Street analysts to significantly increase their one-year price targets on the stock. With excitement surrounding Reddit's future growing, strong post-earnings valuation gains continued over the last week of trading.

What's next for Reddit?

For the current quarter, Reddit expects its sales to come in between $535 million and $545 million. Hitting the midpoint of that guidance range would mean posting year-over-year sales growth of roughly 55% in the third quarter.

Reddit is seeing strong sales and earnings momentum in conjunction with data generated from its platform being a go-to resource for the training of artificial intelligence (AI) models. While the platform's user base has historically monetized at relatively low levels compared to other social sites, data licensing for AI models seems to have changed the game.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Why Reddit Stock Skyrocketed This Week was originally published by The Motley Fool

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