Reddit Inc Class A (RDDT) AI Stock Analysis

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Reddit Inc Class A

(NYSE:RDDT)

Rating:72Outperform

Price Target:

$120.00

▲( 22.05% Upside)

Reddit Inc's stock score is driven by strong financial performance and positive earnings call highlights, showcasing robust revenue and user growth along with effective cost management. However, the high P/E ratio indicates potential overvaluation, and technical indicators suggest bearish momentum. The company faces challenges with search traffic volatility and moderation, which could impact short-term performance.

Positive Factors

Advertising Revenue

Strong advertiser growth of over 50% year-over-year was a key revenue driver for Reddit.

Financial Performance

RDDT reported very strong 1Q25 results with a 61% year-over-year revenue growth.

Negative Factors

Growth Concerns

Slowing 2Q user growth driven by Google search changes resulted in shares selling off.

Valuation Concerns

Premium valuation already reflects growth and margin upside, which could limit further stock price increase.

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

Market Cap

$18.14B

Dividend YieldN/A

Average Volume (3M)8.79M

Price to Earnings (P/E)152.1

Beta (1Y)2.43

Revenue Growth64.12%

EPS GrowthN/A

CountryUS

Employees2,233

SectorGeneral

Sector StrengthN/A

IndustryInternet Content & Information

Share Statistics

EPS (TTM)0.13

Shares Outstanding129,546,500

10 Day Avg. Volume10,256,259

30 Day Avg. Volume8,791,117

Financial Highlights & Ratios

PEG Ratio1.55

Price to Book (P/B)8.90

Price to Sales (P/S)0.00

P/FCF Ratio63.90

Enterprise Value/Market Cap1.07

Enterprise Value/Revenue4.00

Enterprise Value/Gross Profit14.70

Enterprise Value/Ebitda-11.07

Forecast

1Y Price Target

$149.35

Price Target Upside51.90% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering21

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 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 Key Performance Indicators (KPIs)

Any

Total Daily Active Users

Total Daily Active Users
Reflects the total number of users engaging with the platform daily, a key indicator of overall platform health and user interest.

Chart InsightsReddit's daily active users have surged, reaching 108.1 million by Q1 2025, reflecting a robust 39% year-over-year increase. This growth is largely driven by international expansion, with a 46% rise in global users. The earnings call highlights Reddit's strategic focus on diversifying its advertising business and enhancing user engagement through AI-powered tools like Reddit Answers. Despite challenges from Google's algorithm changes, Reddit's emphasis on international markets and innovative product offerings positions it well for sustained growth and profitability.

Data provided by:

Main Street Data

Reddit Inc Class A Financial Statement Overview

Summary

Reddit Inc demonstrates strong financial health with significant revenue growth and a return to profitability. The balance sheet is well-capitalized with minimal debt and high equity, providing financial stability. Cash flow generation is strong and improving, supporting further investment and growth opportunities. Overall, the company is on a positive financial trajectory with improving profitability and cash flow management.

Income Statement

Very Positive

Reddit Inc has shown strong revenue growth with a 12.2% increase in TTM compared to the previous year, driven by robust user engagement. The gross profit margin remains high at 91.1%, indicating efficient operation. However, the net profit margin improved to 8.1% in the TTM, a significant turnaround from previous losses, showing improved cost management and profitability.

Balance Sheet

Positive

The balance sheet is strong with a low debt-to-equity ratio of 0.01, reflecting minimal leverage and financial stability. Return on equity is positive at 5.3% in the TTM, reflecting improved profitability. The equity ratio stands at 91%, indicating a solid capital structure with high equity and low liabilities.

Cash Flow

Very Positive

Cash flow from operations increased significantly, with a free cash flow growth rate of 45.1% in the TTM. The company has successfully improved its free cash flow to net income ratio, indicating strong cash generation ability relative to earnings. Operating cash flow to net income ratio is robust at 2.71, showcasing strong cash conversion efficiency.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.45B	1.30B	804.03M	666.70M	484.92M	228.91M
	Gross Profit
1.32B	1.18B	693.02M	561.90M	412.35M	173.88M
	EBIT
32.59M	-560.57M	-140.16M	-172.16M	-127.21M	-62.56M
	EBITDA
28.85M	-560.57M	-126.46M	-164.16M	-124.40M	-60.62M
	Net Income Common Stockholders
116.95M	-484.28M	-90.82M	-158.55M	-127.90M	-59.17M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.67B	1.84B	1.21B	1.27B	1.41B	362.64M
	Total Assets
2.02B	2.34B	1.60B	1.60B	1.65B	524.14M
	Total Debt
25.22M	26.70M	25.75M	19.49M	13.46M	19.93M
	Net Debt
-943.30M	-535.39M	-375.43M	-416.32M	-1.32B	-92.02M
	Total Liabilities
177.60M	205.85M	155.90M	125.28M	77.63M	65.01M
	Stockholders Equity
1.84B	2.13B	1.44B	1.47B	1.57B	459.13M
Cash Flow		Free Cash Flow
313.21M	215.82M	-84.84M	-100.25M	-132.49M	-64.89M
	Operating Cash Flow
317.58M	222.07M	-75.11M	-94.02M	-130.19M	-61.84M
	Investing Cash Flow
-582.29M	-440.69M	41.29M	-804.18M	170.68M	81.18M
	Financing Cash Flow
-68.13M	379.54M	-811.00K	-3.78M	1.18B	8.33M

Reddit Inc Class A Technical Analysis

Technical Analysis Sentiment

Negative

Last Price98.32

Price Trends

50DMA

109.13

Negative

100DMA

143.63

Negative

200DMA

120.29

Negative

Market Momentum

MACD

-2.44

Positive

RSI

40.80

Neutral

STOCH

5.68

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RDDT, the sentiment is Negative. The current price of 98.32 is below the 20-day moving average (MA) of 112.14, below the 50-day MA of 109.13, and below the 200-day MA of 120.29, indicating a bearish trend. The MACD of -2.44 indicates Positive momentum. The RSI at 40.80 is Neutral, neither overbought nor oversold. The STOCH value of 5.68 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TME	78 Outperform	$25.35B	19.77	14.37%	1.03%	4.59%	83.27%
PINS	77 Outperform	$21.48B	11.53	48.41%	―	17.81%	1175.52%
RDDT	72 Outperform	$18.14B	152.10	5.77%	―	64.12%	―
BIDU	68 Neutral	$29.61B	8.33	9.85%	―	-1.33%	32.92%
SNAP	66 Neutral	$14.09B	―	-23.97%	―	14.91%	59.90%
MTCH	57 Neutral	$7.22B	14.53	-865.98%	1.29%	0.40%	-11.05%
Sector *	57 Neutral	$4.81B	19.87	-17.81%	5.21%	13.60%	-27.95%

* General Sector Average

Performance Comparison

RDDT

Reddit Inc Class A

98.32

43.60

79.68%

BIDU

Baidu

84.07

-16.21

-16.16%

SNAP

Snap

8.43

-6.79

-44.61%

TME

Tencent Music Entertainment Group

16.93

2.44

16.84%

PINS

31.75

-9.69

-23.38%

MTCH

Match Group

29.45

0.40

1.38%

Reddit Inc Class A Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q1-2025)

% Change Since: -17.23%|

Next Earnings Date:Aug 12, 2025

Earnings Call Sentiment Positive

The earnings call reflected strong financial performance with significant revenue and user growth, successful international expansion, and innovative product enhancements. However, concerns about search traffic volatility and moderation challenges were noted.

Q1-2025 Updates

Positive Updates

Impressive Revenue Growth

Reddit reported a revenue of $392 million, marking a 61% year-over-year increase, sustaining a third consecutive quarter of growth over 60%.

Significant User Growth

Reddit ended the quarter with 401 million weekly and 108 million daily users, both up 31% year-over-year.

Strong Advertising Revenue

Advertising revenue grew 61% year-over-year to $359 million, with broad-based strength across objectives, channels, verticals, and geographies.

International Expansion Success

International ad revenue grew 83% year-over-year, the fastest growth rate in three years, with focus markets like France, Spain, and Brazil growing nearly twice as fast as total international users.

Positive EBITDA and Cash Flow

Adjusted EBITDA hit $115 million with a margin of 29%, and operating cash flow reached $128 million, the highest ever, with a free cash flow margin of 32%.

Innovative Product Developments

Reddit Answers, an AI search feature, reached 1 million weekly users and is undergoing global expansion. Machine translation is now available in 13 languages, aiding international growth.

Negative Updates

Search Traffic Volatility

Reddit experienced variability in search traffic due to changes in Google's algorithm, which could lead to potential short-term disruptions in user growth.

Moderation Challenges

The need to evolve account creation processes to combat fake accounts and bots was highlighted, indicating ongoing challenges in maintaining content quality and moderation.

Company Guidance

During Reddit's Q1 2025 earnings call, the company provided robust financial guidance, highlighting a continuation of its strong growth trajectory. Reddit reported a 61% year-over-year increase in revenue, reaching $392 million for the quarter. The platform's advertising business played a key role, contributing $359 million in revenue, also up 61% from the previous year. Reddit's user metrics were equally impressive, with weekly active users reaching 401 million and daily active users hitting 108 million, both reflecting a 31% year-over-year increase. The company also reported an adjusted EBITDA of $115 million, with a margin of 29%, and a GAAP net income of $26 million. Looking ahead to Q2 2025, Reddit projects revenue between $410 million and $430 million, with an expected adjusted EBITDA of $110 million to $130 million, indicating year-over-year growth of 46% to 53% and 180% to 230%, respectively. These metrics underscore Reddit's strategic focus on expanding its user base, enhancing its advertising capabilities, and leveraging its unique community-driven platform for sustained growth.

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.