Investing.com - Citi maintained its Buy rating on Reddit (NYSE: RDDT ) stock Tuesday while raising its price target to $163 from $158, citing strong advertiser demand despite expectations for muted user growth in the second quarter.

The investment bank’s updated outlook follows meetings with Reddit’s leadership team including CEO Steve Huffman, COO Jen Wong, and head of investor relations Jesse Rose at the Cannes advertising festival. Citi noted that Reddit was frequently mentioned in conversations with marketers, brands, and agencies, suggesting significant growth in awareness within the advertising community.

While daily active user growth remains a concern for the second quarter, Citi indicated that recent Sensor Tower data suggests user growth trends may be stabilizing. The firm expressed confidence in Reddit’s product investments, particularly in areas like Answers (search), newer marketing tools, and the company’s data capabilities.

Citi highlighted several specific product developments in its assessment, including Dynamic Product Ads (DPAs) and Community Intelligence tools that are attracting advertiser interest. The bank also noted Reddit’s efforts to leverage its data corpus as a key strength.

Based on these factors, Citi raised its financial projections for Reddit’s second quarter and beyond, supporting the higher price target despite acknowledging near-term user growth challenges.

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