Reddit Inc. (RDDT) stock has been traveling wildly since its IPO last March, soaring from $34 to a shocking $230 before returning for $103. Reddit's jaw-dropping growth has sparked bullish moments, shocking people about whether it can keep things moving. I'll bet. With its unique platform and soaring metrics at the top and bottom line, I think Reddit's decline is a rare opportunity to incorporate a social media giant ready to rebound vigorously.
Reddit's power lies in its vibrant sticky community. In the first quarter, daily active users (DAU) on the platform reached 108.1 million, a year-on-year increase of 31%, while a total of 401 million weekly users were added. Millions of people are exploring all kinds of subred cards from niche hobbies to breaking news. I think, along with X, Reddit is one of the best attractions to feel "conversation" on any given topic.
Meanwhile, Reddit's "Reddit Answers" feature now has 1 million users per week, making it easier for people to find solutions, increase engagement and attract users for longer. For Reddit to maintain sticky user metrics, this should prove to be a powerful mid-term catalyst. This stickiness translates into true endurance.
The platform creates a network effect that is difficult to replicate through its ability to connect users with hyper-specific interests. As more and more users join, the content has become richer and attracted more people. It is a virtuous cycle that drives growth and attracts it for advertisers looking to appeal to a passionate, dedicated audience.
Speaking of Reddit's advertising business, it is firing on all cylinders, and Q1 advertising revenue surged 61% to $359 million. I really like Reddit's ads sneaky but effective. Deep in the thread of your camping gear, suddenly there is a sponsored tent post perfect for conversation.
It's an excellent delivery system that keeps advertisers in line. It is worth noting that over 50% of advertisers join the platform throughout the year, indicating that brands see Reddit as a valuable channel for providing high-yield advertising spending (ROAS).
Reddit's data has become a very valuable asset and the company is starting to profit effectively. In the last quarter, revenue from data licensing and related resources rose 66% to $34 million. This growth is largely driven by the growing demand for high quality, user-generated content for training AI models. Reddit's extensive and diverse dataset covers a wide range of topics, making it particularly suitable for this purpose.
Additionally, Reddit's partnership with Google (GOOGL) aims to improve the visibility of the platform in search results and greatly improve its online presence. As a result, Reddit content is now more prominent, from consumer advice to home repair solutions and more.
Going forward, this revenue stream may become a more important part of Reddit's overall business. As AI technology continues to develop, the value of Reddit comprehensive datasets is expected to grow. The interest shown by companies like Google emphasizes the engaging and insightfulness of these data – it provides a unique window into the breadth of human curiosity and conversation.
According to 2025 consensus estimates, the stock has dropped sharply from its $230 peak and now the stock is trading at about 11 times and earnings per share is 81 times (EPS) (EPS). Although these valuation multiples may increase, they are more reasonable than they seem.
Reddit's revenue is expected to grow 42% this year as the company expects its first year to make a profit. Additionally, analysts predicted EPS per share growth of 83% in fiscal 2026, from $1.24 in fiscal 2025, Reddit's rapid expansion and increased profit margins.
Wall Street now seems optimistic about Reddit after the stocks expanded their sell-off. RDDT stock has a moderate buy consensus rating, with 12 analysts currently bullish, eight neutral and only one bearish. Reddit's average stock price target is $149.35, indicating nearly 37% upside potential in the next twelve months.
Reddit's evolution from grassroots online forums to publicly traded companies with a market capitalization of $19 billion is truly impressive. The recent callback of $103 seems more like a temporary pause than a long-term setback. Backed by strong user growth, a strong advertising business, and an increasingly valuable data licensing component, Reddit is positioning its own long-term success.
My positive prospect stems from the fact that this is not just a traditional social media investment, although it is a space I continue to believe in, which is reflected in my belief in the Meta platform (Meta). Reddit represents a broader opportunity centered on community engagement, data monetization and platform innovation. In my opinion, the current dip presents a compelling entry point compared to the company's next phase of growth.
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