Reddit's (RDDT) latest ad load analysis shows that overall the company is seeing "relative stability" which may be a "healthy signal" as its under-penetration with advertisers may keep driving auction density and improving conversion for larger and newer advertisers, RBC Capital Markets said in a note emailed Friday.

The ad load analysis indicated "modestly lower levels for monetized surfaces" compared with last fall" but desktop news feed was up slightly and is "technically at all time highs," RBC said.

The investment firm noted that investor sentiment on Reddit has "declined significantly recently" due to factors like concerns surrounding AI and also because the company's figures for logged in daily active users, or DAUs, were below expectations.

"The recent sell-off has surprised us where [US] logged in DAUs seem poised to reaccelerate, top-line growth should remain robust/likely above Street and risk/reward on any Google renewal announcement tilts more favorably," the note said.

RBC has a sector perform rating on Reddit and $250 price target.

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