Why Reddit Stock Jumped Today
Key Points
Reddit's user base is expanding at a rapid clip.
Surging ad sales are driving the company's profit growth.
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Reddit's (NYSE: RDDT) stock popped on Friday after the social media platform shared its impressive third-quarter growth metrics with investors.
By the close of trading, Reddit's share price was up more than 7% after rising by over 18% earlier in the day.
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People are flocking to Reddit's sites
Reddit's revenue surged by 68% year over year to $585 million. The social news and discussion forum continues to grow more popular. The number of daily active unique visitors to Reddit's sites rose by 19% to 116 million, while weekly users increased by 21% to 444 million.
Reddit is now the third most-visited website in the U.S., according to Semrush, behind only Google and YouTube.
"Reddit provides something rare on the Internet," CEO Steve Huffman said, adding that "444 million people come here each week for authentic conversations they can't find anywhere else, and increasingly, for engagement with brands, institutions, and publishers."
Advertising was a particularly strong growth driver; Reddit's ad sales rocketed 74% higher to $549 million. The company is investing in artificial intelligence (AI) and automation technology to provide marketers with tools that can help them better target potential customers on its platform.
Reddit's profits are soaring
At the same time, Reddit is rapidly becoming more profitable as it scales its operations. The social media leader's net income increased fivefold to $163 million, or $0.80 per share. That easily surpassed Wall Street's projections for earnings per share of $0.52.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
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