Reddit shares soar 40% on profitability, rosy guidance

Shares of Reddit popped more than 40% on Wednesday, one day after the social media company posted a surprise profit in its third-quarter results and offered rosy guidance.

Reddit's revenue during the third quarter jumped 68% from a year earlier to $348.4 million, up from the $312.8 million expected by analysts polled by LSEG.

The company reported a net income of $29.9 million, or 16 cents per share, compared with a net loss of $7.4 million, or a 13-cent loss per share, during the same quarter a year ago. LSEG analysts were expecting a loss of 7 cents per share in Reddit's third quarter.

Reddit said fourth-quarter revenue will be between $385 million and $400 million, above the average analyst estimate of $357.9 million. 

"It was another strong quarter for Reddit and our communities as we achieved important milestones, including new levels of user traffic, revenue growth, and profitability," Reddit CEO Steve Huffman said in a press release.

Reddit's daily active unique users increased 47% year over year to 97.2 million during its third quarter, and analysts at Citi said Wednesday that this user growth underscored the company's "impressive" results. The analysts reiterated their buy rating and raised their target price on the stock to $120 from $70.

Analysts at JP Morgan said they believe the company is benefiting from structural improvements as it executes across users, product and monetization. They said they're encouraged by Reddit's strong revenue growth, improved profitability and growing daily active unique users.

"We look for continued execution across advertiser scale, new ad formats/tech (Search, Conversation Ads, Shopping Ads), & progress toward [management's] 40% L-T Adj. EBITDA margin target," the analysts wrote in a