Tencent Holdings Ltd (F:NNND) (HKG:0700) has disclosed the sale of Reddit, Inc. (NASDAQ:RDDT) Class A common stock, according to a recent SEC filing. The transactions, spanning from November 11 to November 13, 2024, involved multiple sales totaling approximately $197.6 million. The shares were sold at prices ranging from $126.35 to $138.5 per share.
The sales were conducted by Tencent Cloud Europe B.V., a wholly-owned subsidiary of Tencent Holdings (OTC:TCEHY) Ltd. Following these transactions, Tencent Cloud Europe B.V. now holds 9,238,594 shares of Reddit's Class A common stock.
This move reflects Tencent's ongoing adjustments to its portfolio, as it continues to manage its investments in various technology and internet companies worldwide. Investors will be watching closely to see how this impacts Tencent's strategic positioning in the social media landscape.
In other recent news, Reddit has been in focus due to its robust third-quarter earnings report. The social media company reported a 68% increase in total revenue and a 56% rise in advertising revenue, significantly surpassing expectations. The firm's adjusted EBITDA was reported at $94 million, higher than anticipated. Analyst firms such as B.Riley, Loop Capital, Piper Sandler, JMP Securities, and JPMorgan (NYSE:JPM) all raised their price targets for Reddit in response to these results.
Citi, in particular, maintained a Buy rating on Reddit, citing the company's daily active user growth and platform enhancements as potential growth drivers. Reddit's advertising platform is also expected to capture more advertising spend, contributing to revenue growth.
Furthermore, Reddit's user engagement has seen a significant increase, with total conversation page views rising by 40% year-over-year. The company also reported a notable improvement in profitability, achieving positive GAAP Operating and Net Income for the first time since the fourth quarter of 2023.
These recent developments highlight Reddit's strong financial performance and promising growth trajectory, as the company continues to invest in strategic initiatives such as platform enhancements and advertising tools to drive user engagement and revenue growth.
InvestingPro Insights
As Tencent adjusts its stake in Reddit, it's worth examining Reddit's current financial position and market performance. According to InvestingPro data, Reddit's market capitalization stands at $22.43 billion, reflecting significant investor interest despite the company not being profitable over the last twelve months.
Reddit's revenue growth has been impressive, with a 48.7% increase in the last twelve months as of Q3 2024, reaching $1.12 billion. This strong top-line growth aligns with an InvestingPro Tip indicating that analysts anticipate sales growth in the current year. Additionally, Reddit boasts a remarkable gross profit margin of 89.25%, which InvestingPro highlights as an "impressive gross profit margin."
The stock's recent performance has been particularly noteworthy. InvestingPro data shows a staggering 140.33% price return over the last three months, and a 161.82% return over the past year. This aligns with another InvestingPro Tip suggesting that Reddit is trading near its 52-week high, with the current price at 94.98% of that peak.
While Tencent's sale might raise questions, these metrics suggest Reddit's business fundamentals remain strong. Investors considering Reddit's potential should note that InvestingPro offers 13 additional tips for a more comprehensive analysis of the company's prospects.
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