Reddit Inc Class A (RDDT) AI Stock Analysis

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Reddit Inc Class A

(NYSE:RDDT)

Rating:75Outperform

Price Target:

$169.00

▲(11.02%Upside)

Reddit Inc's strong financial performance and positive earnings call are major contributors to its overall score. Despite technical indicators suggesting potential short-term volatility, the company's robust growth trajectory and strategic initiatives provide a positive outlook.

Positive Factors

New Product Launch

Dynamic Product Ads enable advertisers to deliver dynamically generated ads leveraging real-time product catalog data, which are contextually placed within relevant Reddit communities.

Revenue Growth

The broader launch of Dynamic Product Ads is likely to drive some incremental revenue growth during the holiday shopping period.

User and Advertiser Growth

Engagement gains and newer products (like Reddit Answers) are attracting incremental users and there is a 50%+ Y/Y growth in active advertisers.

Negative Factors

Google Dependency

Investor focus on Google dependency risk has intensified, as Google traffic accounts for 40-50% of Reddit’s traffic, mostly logged out users.

Traffic Concerns

There are ongoing traffic concerns due to Reddit's dependency on Google traffic and the recent AI integration in search, until more conclusive data is available.

User Growth Slowdown

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

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

Market Cap

$28.09B

Dividend YieldN/A

Average Volume (3M)8.30M

Price to Earnings (P/E)246.5

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. Volume10,972,181

30 Day Avg. Volume8,297,018

Financial Highlights & Ratios

PEG Ratio-3.23

Price to Book (P/B)3.92

Price to Sales (P/S)0.00

P/FCF Ratio-57.61

Enterprise Value/Market Cap0.19

Enterprise Value/Revenue1.10

Enterprise Value/Gross Profit4.06

Enterprise Value/Ebitda-3.06

Forecast

1Y Price Target

$149.55

Price Target Upside-1.76% Downside

Rating ConsensusModerate Buy

Number of Analyst Covering24

Reddit Inc Class A Business Overview & Revenue Model

Company DescriptionReddit Inc. is an American social media company that operates a network of online communities where users can engage in discussions, share content, and connect with others based on interests. Founded in 2005 and headquartered in San Francisco, Reddit is known for its diverse user-generated content covering a wide array of topics. The platform is organized into 'subreddits,' each focusing on specific themes or subjects, and is popular for its community-driven approach to content curation and discussion.

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, 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 Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q1-2025)

% Change Since: 28.15%|

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.

Reddit Inc Class A Financial Statement Overview

Summary

Reddit Inc demonstrates strong financial health with significant revenue growth, a return to profitability, and strong cash flow generation. The balance sheet is well-capitalized with minimal debt and high equity, providing financial stability.

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.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
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
EBITDA	28.85M	-560.57M	-126.46M	-164.16M	-124.40M	-60.62M
Net Income	116.95M	-484.28M	-90.82M	-158.55M	-127.90M	-59.17M
Balance Sheet
Total Assets	2.44B	2.34B	1.60B	1.60B	1.65B	524.14M
Cash, Cash Equivalents and Short-Term Investments	1.95B	1.84B	1.21B	1.27B	1.41B	362.64M
Total Debt	26.55M	26.70M	25.75M	19.49M	13.46M	19.93M
Total Liabilities	219.90M	205.85M	155.90M	125.28M	77.63M	65.01M
Stockholders Equity	2.22B	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

Positive

Last Price152.23

Price Trends

50DMA

119.22

Positive

100DMA

128.05

Positive

200DMA

129.66

Positive

Market Momentum

MACD

10.53

Negative

RSI

75.74

Negative

STOCH

82.23

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 152.23 is above the 20-day moving average (MA) of 132.09, above the 50-day MA of 119.22, and above the 200-day MA of 129.66, indicating a bullish trend. The MACD of 10.53 indicates Negative momentum. The RSI at 75.74 is Negative, neither overbought nor oversold. The STOCH value of 82.23 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 (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PINS	80 Outperform	$24.14B	12.98	48.41%	―	17.81%	1175.52%
TME	76 Outperform	$28.79B	22.47	14.37%	0.94%	4.59%	83.27%
RDDT	75 Outperform	$28.09B	246.50	5.77%	―	64.12%	―
BIDU	71 Outperform	$29.82B	8.57	9.85%	―	-1.33%	32.92%
MTCH	64 Neutral	$7.97B	16.04	-865.98%	2.46%	0.40%	-11.05%
SNAP	63 Neutral	$15.63B	―	-23.97%	―	14.91%	59.90%
Sector *	57 Neutral	$5.68B	25.44	-31.28%	5.63%	10.88%	-29.73%

* General Sector Average

Performance Comparison

RDDT

Reddit Inc Class A

159.34

85.72

116.44%

BIDU

Baidu

86.44

-3.62

-4.02%

SNAP

Snap

9.38

-6.37

-40.44%

TME

Tencent Music Entertainment Group

19.17

4.41

29.88%

PINS

35.74

-7.38

-17.12%

MTCH

Match Group

32.44

3.27

11.21%

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: Jul 01, 2025