Reddit initiated with a Sector Perform at RBC Capital

RBC Capital initiated coverage of Reddit (RDDT) with a Sector Perform rating and $125 price target The consolidation of internet user engagement towards a relatively few number of large language model-based generative artificial intelligence tools is in the very early stages, where Reddit “may have mixed exposure,” the analyst tells investors in a research note. Positively, RBC believes the company is poised to grow revenue significantly through a “classic earlier-stage monetization recipe” of user engagement growth, increased ad load, surface expansion and ad tech improvements. However, the firm questions whether investors will reward that outsized growth with a higher multiple. It feels Reddit’s risk/reward feels more balanced at current levels.