Earnings Estimates Moving Higher for Reddit Inc. (RDDT): Time to Buy?

Reddit Inc. (RDDT) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

The upward trend in estimate revisions for this company reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Reddit Inc., there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The earnings estimate of $0.98 per share for the current quarter represents a change of +172.2% from the number reported a year ago.

Over the last 30 days, the Zacks Consensus Estimate for Reddit Inc. has increased 21.53% because 10 estimates have moved higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $2.35 per share, representing a year-over-year change of +170.6%.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, 11 estimates have moved up for Reddit Inc. versus no negative revisions. This has pushed the consensus estimate 25.46% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Reddit Inc. currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on Reddit Inc. because of its solid estimate revisions, as evident from the stock's 6% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

Source Zacks-com