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Reddit Inc Class A (RDDT)
NYSE:RDDT
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Reddit Inc Class A
(NYSE:RDDT)
63Neutral
Positive Factors
Advertising Initiatives
Reddit has a lot of advertising initiatives in place to drive revenue growth, including using larger models and more data signals to increase ad relevance.
Revenue Growth
30% year-over-year revenue growth in each of 2025 and 2026 is the highest among the companies covered.
Negative Factors
User Growth
A surprising deceleration in US user growth serves to increase concerns about sustainability.
Valuation Risk
Stock is valued at a significant premium to peers and is potentially at higher risk of valuation compression with any macro-economic revenue pressure.
Reddit Inc Class A (RDDT) vs. S&P 500 (SPY)
Market Cap
$20.93B
Dividend YieldN/A
Average Volume (3M)9.44M
Price to Earnings (P/E)―
Beta (1Y)2.59
Revenue Growth61.71%
EPS Growth-442.46%
CountryUS
Employees2,233
SectorGeneral
Sector StrengthN/A
IndustryInternet Content & Information
Share Statistics
EPS (TTM)-3.02
Shares Outstanding125,531,500
10 Day Avg. Volume11,880,158
30 Day Avg. Volume9,436,909
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)21.99
Price to Cash Flow (P/CF)58.10
P/FCF Ratio58.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$195.37Price Target Upside68.86% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering20
Reddit Inc Class A Business Overview & Revenue Model
Company DescriptionReddit Inc Class A (RDDT) operates a social media platform that allows users to submit content, such as text, links, and images, and engage in discussions. The platform is organized into various 'subreddits' that cater to different interests, topics, and communities. Reddit is known for its diverse user base and active community engagement. It is a significant player in the online social networking and content sharing sector.
How the Company Makes MoneyReddit generates revenue primarily through advertising. The company offers promoted posts and display ads that appear throughout its platform, targeting users based on their interests and behaviors. Additionally, Reddit has a premium membership program called Reddit Premium, which provides subscribers with an ad-free experience and access to exclusive features. The company also benefits from partnerships and collaborations with brands seeking to engage with its vast and diverse user base.
Reddit Inc Class A Financial Statement Overview
Summary
Reddit Inc demonstrates strong revenue growth and a solid balance sheet with minimal leverage. However, profitability remains a critical area for improvement with negative margins. The company is making progress in cash flow generation, which is a positive sign for future financial stability. Overall, while the financial foundation is solid, the focus needs to be on turning revenue growth into sustainable profit.Income Statement
Reddit Inc has shown impressive revenue growth, with a TTM revenue increase of 61.6% year-over-year. Despite this, profitability remains a challenge as evidenced by negative EBIT and net income margins. The gross profit margin is robust at 90.2% TTM, indicating strong revenue retention after direct costs, but the company needs to improve operational efficiency to enhance overall profitability.68
Positive
Balance Sheet
The balance sheet is strong with a low debt-to-equity ratio of 0.01, indicating minimal leverage. The equity ratio is high at 91.2%, reflecting a solid capital structure. However, the company has substantial cash reserves, which could be better utilized to generate returns. The return on equity (ROE) remains negative due to continued net losses.75
Positive
Cash Flow
Cash flow is improving with a significant turnaround in operating cash flow, now positive at $222 million TTM. Free cash flow has also shown a positive trend. The operating cash flow to net income ratio is positive, suggesting better cash generation relative to accounting losses. The company has effectively managed capital expenditures to improve free cash flow.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.30B | 804.03M | 666.70M | 484.92M | 228.91M | Gross Profit |
| 1.18B | 693.02M | 561.90M | 412.35M | 173.88M | EBIT |
| -560.57M | -140.16M | -172.16M | -127.21M | -62.56M | EBITDA |
| -560.57M | -126.46M | -164.16M | -124.40M | -60.62M | Net Income Common Stockholders |
| -484.28M | -90.82M | -158.55M | -127.90M | -59.17M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.84B | 1.21B | 1.27B | 1.41B | 362.64M | Total Assets |
| 2.34B | 1.60B | 1.60B | 1.65B | 524.14M | Total Debt |
| 26.70M | 25.75M | 19.49M | 13.46M | 19.93M | Net Debt |
| -535.39M | -375.43M | -416.32M | -1.32B | -92.02M | Total Liabilities |
| 205.85M | 155.90M | 125.28M | 77.63M | 65.01M | Stockholders Equity |
| 2.13B | 1.44B | 1.47B | 1.57B | 459.13M |
| Cash Flow | Free Cash Flow | |||
| 215.82M | -84.84M | -100.25M | -132.49M | -64.89M | Operating Cash Flow |
| 222.07M | -75.11M | -94.02M | -130.19M | -61.84M | Investing Cash Flow |
| -440.69M | 41.29M | -804.18M | 170.68M | 81.18M | Financing Cash Flow |
| 379.54M | -811.00K | -3.78M | 1.18B | 8.33M |
Reddit Inc Class A Technical Analysis
Neutral
115.70
Price Trends
169.62
Negative
158.43
Negative
111.23
Positive
Market Momentum
-16.94
Positive
41.26
Neutral
30.04
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RDDT, the sentiment is Neutral. The current price of 115.7 is below the 20-day moving average (MA) of 136.49, below the 50-day MA of 169.62, and above the 200-day MA of 111.23, indicating a neutral trend. The MACD of -16.94 indicates Positive momentum. The RSI at 41.26 is Neutral, neither overbought nor oversold. The STOCH value of 30.04 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for RDDT.
Reddit Inc Class A Risk Analysis
Reddit Inc Class A disclosed 49 risk factors in its most recent earnings report. Reddit Inc Class A reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Reddit Inc Class A Peers Comparison
Overall Rating
UnderperformOutperform
Sector (55)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
84 Outperform | $1.51T | 24.99 | 37.14% | 0.34% | 21.94% | 61.97% | |
76 Outperform | $21.99B | 11.99 | 47.49% | ― | 19.35% | ― | |
71 Outperform | $120.46B | 98.19 | 28.91% | ― | 18.36% | ― | |
63 Neutral | $20.93B | ― | -27.12% | ― | 61.71% | -442.46% | |
62 Neutral | $7.64B | 15.09 | -865.98% | 0.62% | 3.41% | -10.41% | |
59 Neutral | $15.83B | ― | -28.69% | ― | 16.40% | 48.48% | |
55 Neutral | $4.57B | -18.49 | -4.70% | 5.70% | 27.38% | -68.17% |
* General Sector Average
Performance Comparison
RDDT
Reddit Inc Class A
115.70
55.90
93.48%
META
Meta Platforms
596.25
95.06
18.97%
SNAP
Snap
9.33
-1.93
-17.14%
SPOT
Spotify Technology SA
604.71
342.79
130.88%
PINS
Pinterest
34.04
-0.93
-2.66%
MTCH
Match Group
31.66
-3.47
-9.88%
Reddit Inc Class A Earnings Call Summary
Earnings Call Date: Feb 12, 2025 | % Change Since: -46.55% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Positive
Reddit had a strong year with significant revenue and user growth, achieving GAAP profitability and expanding its advertising business. Despite some challenges like the Google algorithm change and stock-related charges, the company's innovative product developments and international expansion highlight a positive outlook.Highlights
Record Revenue and Growth
Reddit surpassed $1 billion in revenue for 2024, marking a 71% year-over-year growth in Q4. Total revenue for the year was $1.3 billion, growing 62% year-over-year.
Strong Advertising Business
Advertising revenue grew 60% year-over-year in Q4 to $395 million. International ad revenue grew 77% year-over-year, the fastest growth in over 2 years.
GAAP Profitability Achieved
For the second consecutive quarter, Reddit was GAAP profitable with a net income of $71 million in Q4, and adjusted EBITDA reached $154 million.
Impressive User Growth
Daily active users (DAUs) reached 101.7 million, marking a 39% year-over-year increase, with international growth leading at 46%.
Innovative Product Developments
Introduction of Reddit Answers, an AI-powered search tool, showed promise in providing curated summaries of community discussions.
Lowlights
Impact of Google Algorithm Change
Late in Q4, Reddit experienced traffic volatility due to a periodic Google Search algorithm change, affecting logged-out users.
Significant Stock-Based Compensation Charges
A $595 million accounting charge related to stock-based compensation was recorded in Q1 2024, contributing to a major loss for the year.
Company Guidance
During Reddit's fourth quarter and full year 2024 earnings call, the company highlighted several key metrics and achievements. Reddit surpassed $1 billion in revenue for the year, driven by a 71% year-over-year increase in total revenue during Q4, amounting to $428 million. The platform's daily active users (DAUs) grew to 101.7 million, marking a 39% year-over-year increase, with international growth leading at 46%. Logged-in users rose by 27%, maintaining a steady upward trend for the past two years. Reddit also achieved GAAP profitability for the second consecutive quarter, with adjusted EBITDA reaching $154 million and a net income of $71 million. Advertising revenue grew by 60% year-over-year to $395 million in Q4, with international ad revenue experiencing a 77% year-over-year increase. The company emphasized its focus on international expansion and the rollout of machine translation in eight languages to support global growth. Reddit's advertising business is diversifying, with 10 of its top 15 verticals growing over 50% year-over-year. The platform's search capabilities are improving, with the launch of Reddit Answers, an AI-powered search tool providing curated summaries of community discussions. Reddit's mission has been updated to empower communities and make their knowledge accessible to all, highlighting the importance of personalized and contextual ad experiences.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.