Reddit Inc Class A (RDDT) AI Stock Analysis

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Reddit Inc Class A

(NYSE:RDDT)

Rating:78Outperform

Price Target:

$215.00

▼(-8.42% Downside)

Reddit Inc's stock score is driven primarily by strong financial performance and a positive earnings call, indicating substantial growth and profitability improvements. While the stock shows bullish technical trends, potential overvaluation and short-term technical risks are present. The company's strategic focus on international expansion and user engagement supports its growth trajectory.

Positive Factors

Advertiser Expansion

The company is successfully expanding its base of new advertisers, with advertiser count increasing over 50% year over year.

Operational Efficiency

RDDT showed an extraordinary increase in adjusted EBITDA, indicating strong operational efficiency and profitability.

Revenue Growth

Reddit reported very strong revenue growth momentum with both Q2 results and Q3 guidance solidly above expectations.

Negative Factors

Traffic Volatility

Concerns exist about Reddit's exposure to user volatility from Google traffic and changes in user behavior.

User Growth Sustainability

Investor debates are expected to remain around the sustainability of user growth, particularly for logged-out/Search-based traffic.

Valuation Concerns

Analyst maintains a neutral rating due to premium valuation and potential traffic volatility related to Google AI changes.

Reddit Inc Class A (RDDT) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$41.93B

Dividend YieldN/A

Average Volume (3M)7.14M

Price to Earnings (P/E)189.1

Beta (1Y)2.28

Revenue Growth69.97%

EPS GrowthN/A

CountryUS

Employees2,233

SectorGeneral

Sector StrengthN/A

IndustryInternet Content & Information

Share Statistics

EPS (TTM)0.45

Shares Outstanding134,585,850

10 Day Avg. Volume10,933,459

30 Day Avg. Volume7,141,054

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)N/A

P/FCF RatioN/A

Enterprise Value/Market Cap0.62

Enterprise Value/Revenue15.67

Enterprise Value/Gross Profit17.21

Enterprise Value/Ebitda175.50

Forecast

1Y Price Target

$198.13

Price Target Upside-15.61% Downside

Rating ConsensusModerate Buy

Number of Analyst Covering24

Reddit Inc Class A Business Overview & Revenue Model

Company DescriptionReddit, Inc. operates a website that organizes digital communities. It organizes communities based on specific interests that enable users to engage in conversations by sharing experiences, submitting links, uploading images and videos, and replying to one another. The company was founded in 2005 and is headquartered in San Francisco, California. Reddit, Inc. operates as a subsidiary of Advance Publications, Inc.

How the Company Makes MoneyReddit primarily generates revenue through advertising, leveraging its vast user base and niche communities to offer targeted ad placements. The company provides various advertising solutions, including display ads, promoted posts, and video ads, aimed at engaging users based on their interests and behaviors. Additionally, Reddit offers a premium subscription service, Reddit Premium, which provides users with an ad-free experience and access to exclusive features. Partnerships with brands and content creators also play a role in driving revenue through sponsored content and collaborations that enhance user engagement and brand visibility on the platform.

Reddit Inc Class A Key Performance Indicators (KPIs)

Any

Total Daily Active Users

Total Daily Active Users
Shows the total number of users engaging with the platform daily, indicating user retention and platform popularity.

Chart InsightsReddit's daily active users have surged significantly, with a 31% year-over-year increase, reaching 108 million by Q1 2025. This growth aligns with the company's strategic focus on expanding its user base and enhancing advertising capabilities. The earnings call highlighted robust revenue growth driven by advertising, despite challenges like search traffic volatility and moderation issues. Reddit's international expansion and innovative product developments, such as AI-driven features, are key drivers of this user growth, positioning the platform for sustained momentum despite potential short-term disruptions.

Data provided by:

Main Street Data

Reddit Inc Class A Earnings Call Summary

Earnings Call Date:Jul 31, 2025

(Q2-2025)

% Change Since: 46.19%|

Next Earnings Date:Nov 04, 2025

Earnings Call Sentiment Positive

The earnings call highlighted Reddit's impressive growth in revenue, user base, and profitability, alongside successful international expansion and new product offerings. However, challenges in traffic acquisition and prioritization of initiatives were noted. Overall, the positive aspects significantly outweighed the negatives.

Q2-2025 Updates

Positive Updates

Record Revenue Growth

Revenue grew 78% year-over-year to $500 million, marking the fastest quarterly growth rate since 2022.

Significant Increase in Daily Active Users

Daily active users grew to 110 million, up 21% year-over-year, driven by product improvements and increased marketing activity.

Advertising Revenue Surge

Advertising revenue increased by 84% year-over-year in Q2, reaching $465 million, with active advertiser count expanding by over 50%.

Strong Profitability Metrics

Adjusted EBITDA hit $167 million, with a margin of 33%, and GAAP net income reached $89 million.

International Expansion

Machine translation is now live in 23 languages, expanding Reddit's reach across Asia, Europe, and Latin America.

Introduction of New Ad Products

New ad formats like Dynamic Product Ads and Reddit Community Intelligence were introduced, enhancing advertiser experience and performance.

Positive Cash Flow

Q2 free cash flow ended at $111 million, with a free cash flow margin of 22% of revenue.

Negative Updates

Challenges with User Economy Initiatives

Deprioritization of user economy initiatives to focus on other pressing projects.

Headwinds in Google Traffic

Traffic from Google presented a headwind in Q2, affecting user acquisition strategies.

Increased Cost Growth

Total adjusted costs were up 38% year-over-year, driven by higher variable cost expenses and strategic investments.

Company Guidance

During Reddit's Q2 2025 earnings call, the company provided optimistic guidance, projecting revenue of $535 million to $545 million for Q3 2025, reflecting a 54% to 56% year-over-year growth. The adjusted EBITDA is estimated to be between $185 million and $195 million, representing a growth of 100% to 110% year-over-year. The company highlighted strong performance in Q2, with revenue growing 78% year-over-year to $500 million and an adjusted EBITDA margin of 33%. Reddit's advertising business also saw significant growth, with revenue increasing 84% year-over-year to $465 million and active advertiser count expanding by over 50%. Average Revenue Per User (ARPU) increased by 47% year-over-year to $4.53. Additionally, Reddit reported daily active users reaching 110 million, a 21% year-over-year increase, driven by product improvements and increased marketing activity. The company emphasized its strategic focus on enhancing user engagement, improving their core product, expanding search capabilities, and growing internationally to capture further opportunities in the evolving digital landscape.

Reddit Inc Class A Financial Statement Overview

Summary

Reddit Inc shows strong financial performance with significant revenue and profitability improvements. The company has a robust gross profit margin, and both net profit and operating margins have turned positive. The balance sheet is strong with low leverage and high equity, indicating low financial risk. Cash flow generation is strong, with positive operating and free cash flow, enhancing financial flexibility.

Income Statement

Very Positive

Reddit Inc has shown strong revenue growth with a remarkable increase from $804 million in 2023 to $1.67 billion TTM. The gross profit margin is robust at 91.26% TTM. Net profit margin has turned positive at 12.97% TTM, a significant improvement from negative margins in previous years. EBIT and EBITDA margins are also positive, indicating improved operational efficiency.

Balance Sheet

Very Positive

The company's balance sheet is strong with a low debt-to-equity ratio of 0.01 TTM, indicating minimal leverage. Return on Equity (ROE) has turned positive to 9.06% TTM, reflecting profitability. The equity ratio is high at 90.67% TTM, demonstrating a strong capital base and low financial risk.

Cash Flow

Very Positive

Operating cash flow has improved significantly from negative figures in 2022 to $400 million TTM, indicating strong cash generation. Free cash flow growth is robust, and the operating cash flow to net income ratio is 1.85 TTM, showing effective cash management. The company has transitioned to generating positive free cash flow, enhancing financial flexibility.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.67B	1.30B	804.03M	666.70M	484.92M	228.91M
Gross Profit	1.52B	1.18B	693.02M	561.90M	412.35M	173.88M
EBITDA	148.91M	-560.57M	-126.46M	-164.16M	-124.40M	-60.62M
Net Income	216.34M	-484.28M	-90.82M	-158.55M	-127.90M	-59.17M
Balance Sheet
Total Assets	2.63B	2.34B	1.60B	1.60B	1.65B	524.14M
Cash, Cash Equivalents and Short-Term Investments	2.06B	1.84B	1.21B	1.27B	1.41B	362.64M
Total Debt	25.18M	26.70M	25.75M	19.49M	13.46M	19.93M
Total Liabilities	245.22M	205.85M	155.90M	125.28M	77.63M	65.01M
Stockholders Equity	2.39B	2.13B	1.44B	1.47B	1.57B	459.13M
Cash Flow
Free Cash Flow	396.85M	215.82M	-84.84M	-100.25M	-132.49M	-64.89M
Operating Cash Flow	400.53M	222.07M	-75.11M	-94.02M	-130.19M	-61.84M
Investing Cash Flow	-64.73M	-440.69M	41.29M	-804.18M	170.68M	81.18M
Financing Cash Flow	-69.74M	379.54M	-811.00K	-3.78M	1.18B	8.33M

Reddit Inc Class A Technical Analysis

Technical Analysis Sentiment

Positive

Last Price234.77

Price Trends

50DMA

152.42

Positive

100DMA

130.18

Positive

200DMA

143.90

Positive

Market Momentum

MACD

22.53

Negative

RSI

86.62

Negative

STOCH

94.24

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RDDT, the sentiment is Positive. The current price of 234.77 is above the 20-day moving average (MA) of 177.11, above the 50-day MA of 152.42, and above the 200-day MA of 143.90, indicating a bullish trend. The MACD of 22.53 indicates Negative momentum. The RSI at 86.62 is Negative, neither overbought nor oversold. The STOCH value of 94.24 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RDDT	78 Outperform	$41.93B	189.09	10.11%	―	69.97%	―
PINS	76 Outperform	$23.67B	12.79	48.08%	―	17.00%	901.05%
BIDU	75 Outperform	$30.25B	8.71	9.85%	―	-1.33%	32.92%
TME	72 Outperform	$31.69B	27.49	14.07%	0.70%	10.66%	84.89%
MTCH	71 Outperform	$8.76B	17.94	-865.98%	0.98%	-0.60%	-11.05%
Sector *	62 Neutral	kr9.30B	37.06	4.32%	2.26%	-19.33%	-52.73%
SNAP	60 Neutral	$12.29B	―	-26.42%	―	13.18%	54.39%

* General Sector Average

Performance Comparison

RDDT

Reddit Inc Class A

234.77

179.22

322.63%

BIDU

Baidu

91.07

4.89

5.67%

SNAP

Snap

7.32

-1.98

-21.29%

TME

Tencent Music Entertainment Group

25.60

14.76

136.16%

PINS

35.78

5.11

16.66%

MTCH

Match Group

38.74

3.73

10.65%

Reddit Inc Class A Corporate Events

Private Placements and FinancingBusiness Operations and Strategy

Reddit Inc Amends Credit Agreement with JPMorgan

Neutral

Jul 2, 2025

On July 1, 2025, Reddit, Inc. amended and restated its Credit and Guarantee Agreement with JPMorgan Chase Bank, N.A., extending the maturity date of its revolving credit facility to July 1, 2030, and decreasing total commitments to $500 million. The agreement includes covenants that restrict certain financial activities and allows for the removal of guarantees and collateral upon achieving certain investment grade ratings, impacting Reddit’s financial flexibility and operational strategy.

The most recent analyst rating on (RDDT) stock is a Hold with a $190.00 price target. To see the full list of analyst forecasts on Reddit Inc Class A stock, see the RDDT Stock Forecast page.

Executive/Board ChangesShareholder Meetings

Reddit Inc Holds Annual Stockholders Meeting

Neutral

Jun 10, 2025

On June 9, 2025, Reddit, Inc. held its annual meeting of stockholders, where four proposals were voted on. The stockholders elected eight directors to serve until the 2026 annual meeting, ratified KPMG LLP as the independent accounting firm for 2025, approved executive compensation, and decided to hold annual advisory votes on executive compensation. These decisions reflect the company’s commitment to governance and transparency, potentially impacting its strategic direction and stakeholder engagement.

The most recent analyst rating on (RDDT) stock is a Hold with a $190.00 price target. To see the full list of analyst forecasts on Reddit Inc Class A stock, see the RDDT Stock Forecast page.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Aug 04, 2025