Reddit (RDDT) is expected to deliver strong Q2 results, driven by faster US user growth, improved advertising tools and stronger AI licensing terms, Wedbush Securities said Thursday in a report.

Reddit's investments in feed quality, app speed, new-user activation and search are seen moving US daily users closer to management's target of 100 million, while Reddit Max, search ads, Dynamic Product Ads and its Shopify integration help attract more small businesses and retailers, the report said.

Reddit Answers is expected to keep gaining users, and the search product may create another source of advertising revenue over time, with Alphabet's (GOOG, GOOGL) Google and OpenAI content licensing as another possible growth driver, Wedbush said.

Reddit and Google will likely maintain their relationship and may build deeper links because posts written by users add value to AI search results, the report said.

Wedbush added Reddit to its "Best Ideas List" and maintained its outperform rating with $250 price target on the stock. Q2 results are expected July 30.

Price: 169.94, Change: -0.44, Percent Change: -0.26