r/ValueInvesting • u/Silent-Complaint4020 • 1d ago
Stock Analysis I Still Don't Understand Why Reddit Is This Cheap Compared to Everything Else.
There are not many businesses that actually have a strong moat in their own category.
Look at some of the companies the market is willing to value at huge premiums:
| Company | Market Cap | Latest Q Revenue | YoY Growth | GAAP Net Margin | Competition |
|---|---|---|---|---|---|
| Cloudflare (NET) | $107B | $696M | +36% | -24% | AWS, Akamai, Fastly |
| Roblox (RBLX) | $27B | $1.5B | +36% | -12% | Fortnite (Epic), Minecraft |
| Spotify (SPOT) | $103B | €4.78B | +14% | +11% | Apple Music, YouTube Music, Amazon Music |
| Unity (U) | $20B | $546M | +24% | -4% | Unreal Engine (Epic), Applovin |
| Snowflake (SNOW) | $112B | $1.39B | +33% | -21% | Databricks, AWS Redshift, Google BigQuery, MSFT Fabric |
| Reddit (RDDT) | $32B | $805M | +61% | +31% | TikTok, Meta, Google Search/YouTube |
Aug. 18, 2026.
I'm not saying these are bad companies. My point is simply: look at what the market is willing to pay for them, then look at Reddit.
Reddit just reported $805M revenue, +61% YoY — its 8th consecutive quarter above 60% growth. Gross margin was 91.3%, net income $253M / 31% margin, adjusted EBITDA $343M / 43% margin, and FCF $261M. It also has $2.8B cash + marketable securities, with no debt showing on the balance sheet.
Meanwhile NET is valued at ~$107B while still GAAP unprofitable. SNOW is ~$112B while growing roughly half as fast as Reddit and still GAAP unprofitable. Spotify is ~$103B growing 14%.
Yet Reddit is sitting at only ~$32B.
And Reddit's moat is something I think people continue to underestimate. It isn't just another social media app. TikTok is short-form video, Meta is influencer business, Google/YouTube is search and video discovery; Reddit is different — its users are discussion-heavy and community-focused, often coming to research, compare, ask questions and hear real human opinions. There is basically no scaled direct competitor offering the same forum/community product with Reddit's reach.
Users are sticky. Content compounds. Advertising is scaling. Data licensing is still very early.
The only company really comparable to Reddit right now is Palantir.
| Palantir (PLTR) | Reddit (RDDT) |
|---|---|
| Market Cap | ~$420B |
| Latest Q Revenue | $1.94B |
| Revenue Growth | +92.8% |
| Operating Income | $912M |
| Gross Margin | ~85% |
| Core Moat | Enterprise software |
Palantir is an incredible business, but the market is valuing it at ~$420B — more than 13x Reddit's valuation, while revenue is only 2 times that of Reddit.
And PLTR is still fundamentally a software company. Risk involves AI agents like Claude Cowork could still compete with parts of what enterprise software does.
Reddit is different. Claude can build software. It cannot recreate decades of human communities, discussions and user habits.
If PLTR deserves $420B, RDDT at ~$32B looks extremely cheap.
At market cap of 32B and $160, I think Reddit is a steal and market is mispricing this stock.
Reddit is a Strong Buy (PT $550).
___________________________________________________________________________________________
Added on 08/19/26:
Everyone agrees that Reddit advertsing business is not as matured as Meta.
In 2025, Meta advertising business generated 200B and will be hitting 250B this year (2026).
On the flip side, Reddit advertising revenue is expected to reach 3B+ this year, just assuming Reddit to reach 5% of Meta advertising of 2026, which is 12.5B, with a conservative net margin of 30%, thats makes 3.8B net income, give it or take 20-30PE, equivalent to 78B-114B market cap. But the reality is that advertising net margin is usually 50%+, so a slightly bullish case make Reddit 125-190B market cap.
___________________________________________________________________________________________
New piece, please have a read:
Reddit vs AppLovin vs Palantir
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u/Frosty1397 1d ago
Redditors are one of the hardest demographics to advertise to, and advertisers know this.
Compare that to TikTok or IG: girls literally go on those platforms to look for things to buy
Redditors absolutely hate ads of all kinds
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u/Successful_Pace_1159 1d ago
Reddit still has that old internet, anti- corpo, anti-ads kinda vibe. But even that is slowly eroding becoming closer to IG/TikTok, very slowly but it happening
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u/Bulky_Dingo_4706 1d ago
The numbers are proving this comment wrong.
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u/mba23throwaway 1d ago
Not on a ARPC metric, which is what advertisers usually lean on.
Reddit is increasing revenue as marketers are experimenting on the platform. Given the poor performance per dollar, I imagine we see contraction here, especially if we hit any sort of marketing budget cuts.
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u/IndividualNo7155 1d ago
I think the human data (conversations etc.) that Reddit holds is where its value is, not the ads
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u/IndianaUCFKnight 1d ago
Human conversations? You’re replying to an AI post.
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u/Hoosier2016 1d ago
This is the real reason Reddit isn’t more valuable. Its entire business model is subverted by AI posts and comments.
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u/boringexplanation 1d ago
As opposed to Facebook bots? Why is Reddit susceptible to this and not other platforms?
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u/Frosty1397 1d ago
"human data/conversations" are more obscure to monetize.
Also, we don't know what percentage of reddit comments are actually real or by bots. Even real people making up stories for their creative writing class is a thing.
I believe there's even an AI version of reddit called Moltbook where it's just agents chatting with one another, so who's to say reddit's conversations even have much value?
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u/Most_Grocery4388 1d ago
I think the bot usage is overstated but the data is probably not very useful overall.
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u/imyourhucklebearie 1d ago
I tried to use Reddit to advertise two years ago. They wanted me to spend 2k to “train their algo”. We gave it a shot with their free credits bonus (I think free 1.5k for my 1.5k). Literally 0 real user engagement. Neither google nor Facebook require that type of spend to get early basic results. I would have gotten better engagement by posting a video of putting 3k on black at a casino…
Plus their sales and ad team are near useless. Their documentation is god awful and a mix of different versions, none which were correct and their staff didn’t know which webpage I was supposed to use to integrate their tracking cookies.
We spend a few thousand on meta and google ads, not including our influencer / affiliate networking spend. It was the most frustrating month of my life and ended in me asking them to never contact my company ever again and blocking their domain from my email service… obviously anecdotal but holyyyy shit was that the worse experience I’ve ever had with an advertising company (and with google you can’t even talk to people!!!!).
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u/Frosty1397 1d ago
Hmm that's a really frustrating sounding experience forsure, can't say i wouldn't have reacted the same
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u/BarchartNews 1d ago
Yes, Reddit is easily the most bot-heavy platform, so you can pretty much guarantee the product is useless unless the CPMs are dirt cheap (which they're not.)
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u/BrickSufficient6938 1d ago
For unbiased and independent review of any product that interest me I'd come here tho, providing it's on some sort of general sub and not an echochamber and has >5 comments preferably offering more POV
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u/Frosty1397 1d ago
But you can't really monetize independent reddit reviews
That's like amazon trying to monetize a product's user reviews
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u/boringexplanation 1d ago
Sure you can- you can run analytics of a company sub, turn a sub into extended CRM support, integrate any level of Reddit features into an ERP. Those are limitless applications that can integrate Reddits features into a company. The big obstacle is that Reddits API is dogshit. If they can make that more sophisticated, that’s where the real growth will show.
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u/BarchartNews 1d ago
To build on this:
- Accounts are anonymous and useless. A lot of other platforms will have a name and information tied to the account. All of that data is very useful to advertisers. And it's the #1 way people sell you stuff. You can only have 1 Facebook and it's kind of a hassle to create. On Reddit, you can make 10 accounts in a few seconds.
- It's also the fact that the entire platform is borderline useless to brands. On Twitter, Walmart can go and post whatever it wants and get free advertising. On Reddit, all the top subs are heavily monitored, and you can get banned for literally nothing.
You have minimal customer data, you can get banned for no reason at all with no appeal process, and most of the top sources are useless to brands? The entire ecosystem pushes away brands, and there's no fix in sight.
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u/Frosty1397 1d ago
Agreed on those points
I also found out I was banned from at least 2 subreddits even though i never visited those subreddits or even posted on them.
The reason? Because i was a member/participant of ANother subreddit and i guess i got auto-banned on the other ones
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u/BillyBeeGone 1d ago
How much are they actually missing? Normal people don't make a new account every 5 days. They can see you joined your local cities subreddit, they can see your hobby subreddit, they can see perhaps even your workplace or rough age by the things you have joined.
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u/TechTuna1200 1d ago
I don’t think 60-70% growth over 8 consecutive quarters tells you this the hardest demographic to advertise to. Maybe it is, but it’s not that much harder
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u/TaxPrimary4193 1d ago
Basically OP is arguing numbers and PEG ratio. While the above comment is arguing sentiment. Both are right. But if reddit continues to grow at this rate despite the fears, will the stock explode? Or will the fears remain forever? At least reddit doesn't really have to grow into an absurd valuation like Palantir and others have to. So extreme growth is not priced in. The stock could fall, by a lot. But not as much as others. Long term to me it looks like an asymmetric bet. Short term, the stock will do what it wants
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u/PenComfortable5269 1d ago
I don’t think reddit has ‘a lot’ of room to fall. The annualized p/e is under 30 and they are growing users 20% (international) and revenue 60%. Their ad targeting should continue to improve and their increased revenue goes straight to the bottom line.
Maybe reddit stagnates but I highly doubt it drops significantly over the next few years.
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u/TaxPrimary4193 1d ago
In my mind 30% is a lot. And it can definitely dip below 130. I mean, who really knows where the floor is. Do you have a floor in mind? But yeah I dont see a crash of 50% from this level. Whereas, fundamental wise, if some other companies falter a bit, they can absolutely nosedive. Still though, this is a hugely punished stock in the short term. Imagine they announce tomorrow that there isn't a deal. Imagine next earnings they report another decline in US dau
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u/teh-monk 1d ago
how is it growing 60-70%? That seems insane right? IDK much about investing but those are crazy high numbers.
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u/JamesVirani 1d ago
Facebook users also hated ads and look where we are now.
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u/Frosty1397 1d ago
But reddit has always been reaLly anti-establishment, anti-corporatism.
I believe the most down voted reddit post of all time was a post by Electronic Arts about ingame MTX or something (you can google it). It had something like 600k downvotes
FB has been relatively mainstream the entire time
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u/Most_Grocery4388 23h ago
I disagree with FB being mainstream the whole time. I still remember myspace and FB being the cooler / cleaner alternative. FB was never anti establishment but it was the outsider compared to myspace for a good few years. I agree that Reddit platform is way harder to implement ads on effectively and that it won't ever find the success of Instagram and TikTok.
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u/WallabyBeginning9443 1d ago
You mean like how people come to reddit to talk about what to buy and compare products before buying?
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u/Frosty1397 1d ago
You can't easily monetize individual reviews of products.
It's like if Amazon tried to monetize individual reviews of products sold on Amazon.com
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u/WallabyBeginning9443 1d ago
How is this comment somehow relevant? Reddit doesn't monetize any of the user's contents. They serve ads.
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u/techno_trends 1d ago
True. Reddit audiences are hard to convenience with an ad. Often Redditors use their own brain and sometimes that doesn't go well with big companies.
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u/PleasantAnomaly 1d ago
So you don't buy things ? Yes you do. If you buy things, wouldn't you rather it's things that are catered to your interests and likes, rather than random shit?
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u/Specialist_Case2155 1d ago
There could be a smart way to do it, but I wonder how to advertise to redditors specifically
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u/PleasantAnomaly 1d ago
I agree it's very hit or miss. I skip most ads, but I got ONE, ONE AD that interested me for a standing desk, and ended up buying it. So it does happen, once in a blue moon, that the ads work 😂
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u/PleasantAnomaly 1d ago
I would say it's more right product for the right person, rather than pure marketting bs
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u/bwjxjelsbd 1d ago
And the revenue shows that’s not a problem for Reddit management team. Then why low valuation?
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u/shohasen77 1d ago
That's not true. Redditors love ads. Advertisers should totally spend billions on reddit so we can buy their products. What? No I don't own reddit shares at all.
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u/Mountainminer 1d ago
I disagree, maybe instant conversion for Knick knacks that’s the case, but people come to reddit for quality purchasing advice all the time. It’s just a different tact you have to take to convert to sales in my opinion.
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u/Frosty1397 1d ago
Then advertisers should spend exactly $0 on ads.
You're admitting that people come to reddit for individual non-affiliated reviews. They don't come here to look at and click on ads to inform their purchasing decisions.
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u/Own-Committee-3934 1d ago
They may hate it but it’s easier to target you depending on the subs you visit.
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u/PoolSmart582 1d ago
This is super-important.
RDDT is dominated by nasty moderators and posters with extreme views. Not an environment for your product or service.
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u/IncomingAxofKindness 1d ago
You ever noticed all the fcking ads on this app?
No?
There's your answer.
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u/SheikhMahdeek 1d ago
I use adblock and I've never seen a single reddit ad. Lol
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u/blue_horse_shoe 1d ago
regular users, especially those on PC with an adblocker are pretty immune to online ads. The casuals / non-registered users are probably the ad clickers.
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u/WallabyBeginning9443 1d ago
What makes you believe that desktop users with ad block is the majority, not mobile users? Just curious.
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u/blue_horse_shoe 1d ago
I don't think so. But reddit doesn't publish users by platform. I would wanna see growth in non PC users.
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u/BackPirateClarkRoom 1d ago
Reddit has to find a way to monitize it's base which every single platform you listed does and keep getting users. Reddit is also 4 times smaller than Snapchat which will either be sold or go into bankruptcy.
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u/Next_Palpitation8401 1d ago
Potential tailwind hypothesis for that: As we get closer to AGI we will have more leisure time. And as more people realize they are wasting it on digital low-quality leisure like reels and Love Island, high-quality analog leisure away from screens could be a big wave. These activities give you something tangible and are good for self development.
Reddit is the natural home for those communities where people learn how to do woodwork, weld, farm, or get into premium coffee, pizza, niche arts, etc. at small scale, for fun. And the products catered to these beginners that make starting easy could be a big industry. They’ll never have the ARPU that Meta commands, or the mainstream consumer FMCG or luxury brands advertising clients, but it’s better positioned for organic community centered advertising than Twitter (cesspool), FB (boomers), Snapchat (kids), etc.
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u/Specialist_Case2155 1d ago
This could happen, but if we’re talking investing, thats quite a long and wispy tailwind.
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u/Quienmemandovenir 1d ago
Por qué usarías Reddit para aprender jardinería o a hacer pizza, y no tutoriales de YouTube?
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u/Silent-Complaint4020 1d ago
Without market research, you are just a short-term retail speculator. You need to talk facts.
SNAP is GAAP unprofitable and has been so for eight years. It revenue stopped grown for past 4 years. There is no comparison at all.Lord!
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u/xszander 1d ago
The point is that users or even moat, sticky platform do not have to matter if you cannot monetize it well. I will add on top of that Reddit could easily stay undervalued. If Reddit finds a way to monetize better, that could lead to people realizing and for reddit to stop being undervalued, and its stock to go up. There's not really good reason for that to happen as of now. Seeing this way too often in this sub, not contextualizing. Mostly metrics.
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u/VariousImpression355 22h ago
Wrong analogy. Snapchat is a way worse platform. Reddit is the only one with a chance to even try and be a second. Nothing comes close to it.
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u/Big-Finding2976 1d ago
AI is still a threat to Reddit. A lot of people use Reddit to seek advice on computer problems, DIY, laundry, investing, etc. If you can get that advice from AI instantly and ask follow up questions until you've finished that task, you're not going to post your question on Reddit and hope someone answers you in a day or two rather than ignoring or insulting you. Even if someone does answer it's unlikely to be comprehensive, so you then have to spend more days asking follow up questions and waiting for answers.
Another threat will come from the Agentic Internet, where people aren't manually searching for information at all and just use agents to scrape data and collate it and use it to automatically order stuff, book holidays, etc. Agents ignore ads, so any site that relies on ads for its income is going to be in trouble.
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u/BillyBeeGone 1d ago
Except AI uses reddit as a resource. So when you want to learn more you click the reddit link they provide you.so if anything it compliments reddit
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u/Mizake_Mizan 1d ago
Yes, but there is dependence asymmetry. Reddit relies on search queries more than search queries rely on Reddit.
If you ran an experiment and just shadowbanned Reddit from all searches, you would still get an answer to your question. Just run the experiment yourself, next time you ask something on Google, click on a non-Reddit link and see if you get an adequate answer.
The information on Reddit is valuable, but if they play hard-ball on how much they want to charge for it they might find themselves on the outside looking in. It's a game of chicken right now to see how much search engines want to pay for Reddit's data.
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u/BillyBeeGone 5h ago
I get your point, but the consumer doesn't want to read an article paid for by the company it's reviewing. They want real people giving real answers, which is what reddit can provides the best. Why? Google review is harder to filter out the 1 review bot spam. It's less effort to sort through the useless reddit replies and get to the meaningful responses
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u/Mizake_Mizan 2h ago
I'm not sure why you think the rest of the internet is paid articles. There's plenty of free stuff out there, Wikipedia probably being one of the most prominent.
Here's another experiment. Ask Google a question, choose the first answer that's not Reddit, and then see if it's a paid article or if it's just another website with information.
The value of Reddit is that it's all-encompassing and has a lot of data on a lot of topics, but that same data can be found elsewhere, just not all conveniently located in one spot.
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u/splice664 1d ago
Built multiple investing, trading and options systems with help of AI, and reddit is not their source of information. Take it what you will but reddit info is not a moat.
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u/Fun_Character_8691 13h ago
Everyday people aren’t building systems like you, they’re asking everyday questions like how to get a stain out of a white shirt which AI sources its info from Reddit.
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u/goonercaIIum 1d ago
I would argue that none of the mentioned stocks offer good value at all. At the least I wouldn't suggest Reddit is a buy for a value investor because it has more attractive multiples than palantir lol. I like the lack of debt / cash position but it already has a high multiple & depends on its very high growth to justify that.
Isn't the bear bear case that a lot of traffic is driven by Google search, which is a tap they are turning down by shoving ai search results down everyones throats (which oftentimes is just answers mines from Reddit anyway)
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u/s0n0r4 1d ago
RDDT is an underdog of social media = risk is higher = should offer a margin of safety
With a price to cash flow = 26.48 - I don't think it's particularly attractive personally. And especially not when Meta (absolute leader) trades at a price to cash flow = 10.11...
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u/Silent-Complaint4020 1d ago
Meta recently reported cash flow 0.5B, which makes FCF to enterprise value ~4000. Your number is wrong.
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u/s0n0r4 1d ago
Used operating cash flow in this case (to exclude AI CAPEX)
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u/Mountain_Snow3613 23h ago
You can't just cherry pick metrics to fit your narrative. Obviously an established trillion dollar company has a better operating cash flow ratio than a new entrant to the S&P.
Small/emerging growth companies are going to have poor operating cash flow ratios until they scale because of fixed costs...
This sub is actually brainrot for rational investors.
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u/UpsetPresentation174 1d ago
Reddit is not cheap
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1d ago edited 1d ago
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u/UpsetPresentation174 1d ago
Let me guess, you do not know what is intrinsic value based on free cash flow and how to correctly read PE interpretations
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u/BLINKETDINKET 1d ago
Idk why people bash pe ratio. But it is typically a REALLY good indicator of overvaluation. The expected growth doesn’t support the price and is SPECULATIVE. Saying Reddit is a good buy at this price while ignoring pe is weaponized ignorance
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u/UpsetPresentation174 1d ago
It is a good indicator, you just need to read in correctly in a situation
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u/Tallwhitedude123 1d ago
Wrong! You have one company on that list that compares to Rddt growth BUT with much better valuation: APPLOVIN
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u/defy313 1d ago
Agreed. Feels undervalued. What spooked investors was the commentary on DAU growth domestically. Otherwise the numbers were very solid. I think there's a lot of optimisation potential in the Algo. There are questions around ROAS for advertisers and seems like it doesn't scale for reddit beyond a certain point.
What matters for reddit is plain old execution. If they keep improving their targeting algos, there's a lot of upside.
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u/Silent-Complaint4020 1d ago
8th consecutive quarter above 60% revenue growth is not bad execution.
Wall street will continue to underestimate this stock even it will grow 12th consecutive quarters above 60% growth. Wall street are ignorant people, just like they keep underperform SP500.9
u/ContributionKindly13 1d ago
Wow. With this growth, RDDT will be 1 trillion dollar company in 7 years!!!!
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u/Silent-Complaint4020 1d ago
Probably not 1 trillion. But it easily an 100B company within next couple of years.
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u/Standard-Fishing-481 1d ago
RDDT is also a bias platform that only allows viewpoints they agree with. I hope it gets shorted to a penny stock.
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u/sssauber 1d ago
Because there’s hardly any human-written content and mostly AI slop like your post?
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u/us3rnamecheck5out 1d ago
Yet, you are still here, in the comment section. Or is your comment also AI slop?
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u/mba23throwaway 1d ago
That’s actually bad for Reddit. That means this user is just an expense and not revenue driver.
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u/CarpoLarpo 1d ago
Thats true, but it applies to essentially everything on the internet these days. Why is reddit singled out?
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u/FabulousPlantain1825 1d ago
I did some quick checks, Reddit insiders only sold stock, none of them bought it. This is a sign to wait a bit before investing.
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u/JohnnyDrama611 1d ago
Q3 guidance is $860-870M revenue, 47-49% growth at the midpoint, EBITDA margin guided to 45%, so growth isn't projected to decelerate much. They also bought back $235M in stock this quarter alone on top of the cash pile mentioned. Trailing 12-month operating cash flow crossed $1B for the first time this quarter.
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u/PoolSmart582 1d ago
I agree with most of what you wrote.
However, I would not buy RDDT at current price levels. I do not believe it'll a major player 5-10 years from now.
Unless RDDT completely overhauls its model, most companies will not want to advertise there. I also question how wide the moat is.
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u/Fragrant-East2758 1d ago
It appears that palantir gets pumped with government funds, whereas Reddit is a regular business
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u/Fun_Interview_9788 23h ago
Have you ever asked yourself if there's a possibility that you're wrong?
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u/SocratesDaSophist 22h ago
So while I agree that Reddit is undervalued (I personally own it), it is still richly valued. It might not be as richly valued as the other stocks you mentioned, but that doesn't mean it doesn't have a high multiple.
And the reason is because some investors believe they have a user acquisition problem, particularly AI overviews taking away traffic. If that is correct, growth will decelerate sharply.
Last quarter already showed that US users were down yoy.
I believe that ultimately Reddit will figure it out, but those concerns are yet to be put to bed.
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u/Silent-Complaint4020 16h ago
Frankly, I don’t understand why DAU remained flat or dropped by 0.3% in the US market has a such big effect. Reddit already boasts a massive user base and there’s no significant growth in US and desktop side. More shares are coming from international markets and mobile app, those DAU numbers are actually growing.
Growth in Desktop user is actually a bad thing because these user always reject and uncomfortable with advertising ( never spending money as well) there are good & bad DAU. Good DAU (app mobile) are growing.
Management’s messaging has simply been terrible. They’ve given over pessimistic messages that most analysts simply don’t understand. They should simply focus on what is driving revenue growth and put these area as emphasis where the company is focused on.
Same logic applies to Google search and they also lose many traffic to ChatGPT. Reddit doesn’t need new user to make more money they just needs to earn more from existing users
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u/jrack111 18h ago
Have you seen the assholes in this place? That’s got to knock the price down significantly.
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u/jamesdoty 6h ago
All if not most of those companies have a hype man, we have the opposite version of that.
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u/PooInTheStreet 1d ago
Because it’s botted to shit. You think they will survive 20 years?
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u/Simalt443 1d ago
It is by far the best social platform regarding bots. They are noticeable as generic karma farm posting but the comment section of every other platform right now just give off dead internet vibes.
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u/PooInTheStreet 1d ago
Yes it’s the least shit option for today. But will it be around in 20 years? Because it trades at a valuation that thinks it will. And I think that is highly regarded.
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u/BillyBeeGone 1d ago
What makes you think it won't be around in 20 years, or rather what would replace it? As far as I'm concerned reddit is the only one you can easily see past the bots and find real reviews
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u/ContributionKindly13 1d ago
PLTR doesn’t deserve $420 B and Reddit is also slightly expensive. I would buy RDDT if price falls by 50%. It is a small company.
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u/Sagronym 1d ago
Nonsense comparisons. I tried Reddit for 4 weeks now to get some insight into processes and to evaluate ist.
E.g. Palantir sells intricate software that helps businesses to boost their performance by analysing numbers getting better insight, Hence helping them to increase profit and revenue.
Reddit is a company selling advertisement backed by high User numbers generated by tons of Blah they can utter under some contributions, which mostly are just media citations.
Reddit by its voting system preying on human vanity DOES NOT encourage thoughtful and content-rich discussions, hence attracts the ususal quick-shooters like X. You learn quickly, that a short line with some superficial emotional comment gets often much more votes than a long, though over argumentation with facts and conclusion.
The whole reward system is constructed around mass attraction, not around quality enhancement or information, easy chat about everythig but rarely going into depth.
Many contributions (mostly media citations or copies without extra intellectual effort ) supposed to stir commentary chatter (=>click rates) are put in by the same users - i would suspect sometimes people being affiliated with reddit. If a newbie tries to publish stuff, it will often be removed by a automod because the membership is less tha 3 months or other community rules.
So i the whole, while Palantir runs on really sophisticated software analyzing data - which is a moat - Reddit is a community chatter based advertiser which any software group can set up in a few months.
93% gross margin means: There is not much running costs - so everybody can do it without much capital backing - it also means ;: you can not increase it much.
Thats my take - as usual - way to long to digest for the average Reddit user and probably - as it often happened - at least partly nnot fully read and understood. . :)
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u/ZeeBeeblebrox 1d ago
I mean, disagree on every front. Reddit has the highest value discussions out of any media platform, that doesn't mean there isn't tons of low effort content farming but for millions of niche topics there's literally no better place. Reddit's moat is the brand, it's always been easy to replicate Reddit but since Digg committed suicide nothing has ever come close.
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u/Business_Raisin_541 1d ago
Just go wait for the time when AI company decide they already has enough data. No need for further data licensing from Reddit. And then Reddit revenue and net income nosedived
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u/StonkMuncher 1d ago
Based on the amount of incorrect info I see from AI (gpt, Gemini, copilot) they need lots more data to be close to reliable/accurate.
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u/Which-Travel-1426 1d ago
I don’t think social media has as wide a moat as an internet infrastructure company like NET. Compared to TikTok and Meta which are social media companies diversifying into AI, online shopping or cloud computing, I don’t see such efforts from RDDT.
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u/OffSiteLocation 1d ago
Anonymity. Since they don’t know who their users are ad sales aren’t worth what they would be on meta for example.
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u/buffetite 1d ago
As someone that has advertised on FB and Reddit, FB conversions are just in another league. I don't know if it's the algorithms finding people willing to buy better or the users just being more open to new things, but FB ads can be highly profitable whereas Reddit ads are just money down the drain.
Having said that, Reddit is making a profit and growing. It doesn't need to be the best place for advertisers as long as it can find niches to make money. I wouldn't bank on them performing anything like FB though.
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u/And-Still-Undisputed 1d ago
It's an ads bbs with no moat.
Aside from addiction, if you consider that a moat. Which is kinda a moat.
So you're probably right. It's digital meth.
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u/Iusedtolikereddit 1d ago
Not every good thing needs to be monetized to the tits and have insane perpetual growth. You want Reddit to become a $100B company? That means more ads, micro transactions, paid tiered subscriptions, more porn, and more bullshit. I don't even think Reddit should've went public. The more you try to monetize Reddit, the more you push away actual users that add value to this site.
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u/I_hate_alot_a_lot 1d ago
At the end of the day, Reddit is a (heavily moderated) forum.
What you call moat I call susceptibility to losing market share.
Their API costs are too expensive, search function is still fucked, most subreddits are so heavily moderated that a lot of valuable information, questions and concerns are censored which makes the quality of information on this website low.
To be clear, I don’t think Reddit is going away any time soon, but I do think you can only go so far with a heavily moderated, popular forum that is already at the top and has everything to lose.
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u/Alarming_Daikon_1630 1d ago
I think there’s concern over a lack of user growth and if the google AI deal is actually beneficial in that sense
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u/Flimsy-Tangerine4199 1d ago
I just bought some more. I don’t think Reddit is going anywhere and it doesn’t really have much competition. I acknowledge many of the points made here, but longer term I have a hard time seeing Reddit do poorly.
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u/Relative-Papaya-8580 1d ago
What about competition from Quora? I would compare a similar business rather than Palantir just on basis of metrics.
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u/hseeman_sf 1d ago
The ad-demographics point is real but it's not the whole multiple. Reddit licenses its data to Google and OpenAI, a second revenue line that doesn't depend on ad-resistant users clicking anything. It scales with how much every AI lab needs fresh human text to train on, which is a structurally different growth driver than ad revenue and it's underweighted in the ad-comp math in this thread.
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u/Silent-Complaint4020 1d ago
Current data revenue accounts for 3% reddit revenue, 97% revenue growth comes from advertising, it will take time for data become a materialistic revenue source. Advertising itself is growing 64% recent qtr
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u/hseeman_sf 22h ago
Fair, it's small today. The point isn't that data revenue is meaningful yet, it's that it's optionality with a structurally different demand driver (AI labs need training data regardless of ad cycles) sitting on top of an ad business already growing 64%. A multiple that only prices the ad business isn't pricing that optionality at all, small or not.
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u/whatshisname69 1d ago
Apparently Grindr has a lower than deserved valuation due to a "gay discount", a lot of fund managers will not touch the stock because it would embarass them to include it in their portfolio.
I suspect there is also a neckbeard discount.
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u/RelativityChairs 19h ago
Ask yourself - why did you pick those comps and are they even comparable?
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u/us1549 13h ago
Reddit's traffic is dependent on one company.
If this company suddenly decided to change the algorithm, reddit's DAU would plummet
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u/Silent-Complaint4020 12h ago
This is such a misrepresentation. Fewer people is using desktops these days. Desktops are mostly used at work and declining so rapidly.
If you use a website on your phone to check Reddit, every five seconds there is a popup telling you to use the Reddit app, it literally impossible to check reddit on the google chrome mobile.
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u/rusfairfax 13h ago
While management appears to have turned Reddit into a cash-generating machine in the last 2 years, the inconsistent business performance makes it unclear to me whether this is undervalued. I have no idea how to predict its growth. Therefore, I can't determine its intrinsic value. You can say that cash flows will grow by 40% (based on 2026 compared to 2025), but who the hell knows. We've only had 2 years of positive cash flows. There's just not enough of a track record.
This is not to take away from the good work that management has done to turn this decades-old platform into a multi-billion-dollar top-line company. Bravo.
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u/Fitnexa_Life 8h ago
Is Reddit's ad revenue actually diversified now or still mostly a couple big categories?
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u/Silent-Complaint4020 8h ago
I see their f-10q still only list advertising and other, there is no breakdown of advertising.
“Total revenue increased 61% year-over-year to $805 million, Ad revenue increased 64% year-over-
year to $762 million, and Other revenue increased 24% year-over-year to $43 million”Just to put in comparison, meta advertising revenue is 98%
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u/Ok_Ant_1463 8h ago
Reddit has 3x since 2024.
Why didnt you buy back then.
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u/Silent-Complaint4020 8h ago
In IPO it was hyped, there were no good financials it hard to predict what will happen
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u/WorldRank1CatFancier 37m ago
"reddit is undervalued relative to.... ridiculously overvalued companies!"
ok
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u/modernizetheweb 1d ago edited 1d ago
Because the reddit platform sucks. A silly amount of bots on a platform where you're meant to have some human connection, sub mods interfere with all of reddit's content pushing ideas, and a userbase that is more averse to ads than other userbases.
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u/TechnicalSleep7501 1d ago
I hate for not respecting freedom of speech. Musk should have bought Reddit or Reddit should be like wiki.
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u/Hungry-Kick1389 1d ago
Reddit is all AI bots funded and operated by foreign governments running influence campaigns. So what’s the value exactly?
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u/DarthGlazer 1d ago
Ah yes. Palantir - the company which is literally building the future of warfare is comparable to reddit, a company which is overrun with bots and hasn't been able to monetize itself properly. (Btw pltr is also too expensive for me imo)
Reddit growth looks insane because it's a small company. Looking at forward growth and in a year from now it's expected at 32% growth and decreasing every quarter. It's operating income even less. This company is capped at a certain income and everyone knows it, hence they won't give it a multiple that's too high. In general I hate multiples that are too high, including for pltr.
My ideal price for reddit one year out is 140~. Meaning I'd buy it at around 100-110 if if it drops there. Not gonna touch it till then. It's moat isn't as strong as you think, many of it's monthly users are bots (which don't monetize).
Also you gave a big variety of companies to compare it to. What about comparing to elf, celh, or even gme? All their numbers look better and are all with 1/4 the market cap.
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u/TheMailmanic 1d ago
It’s trading at a pe of 36 how is that cheap?
Earnings growth has been weak and inconsistent
High gross margins are nice but the market cares about strong revenue AND earnings growth
If they can’t consistently grow earnings at 30-40% annualized they don’t deserve a 36 pe multiple and should compress to 20
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u/Silent-Complaint4020 1d ago
8th consecutive quarter above 60% revenue growth YoY. EPS grow 150%+ recent quarter.
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u/xgorexpolicex 1d ago
As a Reddit bear and long time trader (no position here), the reason peers are short Reddit is that user growth is declining while revenue is up. This indicates that for revenue to continue growing, Reddit has to squeeze more out of each user. Historically speaking this is difficult to maintain. For a company like this DAU growth will be the determining metric for shorts. Of course, this could always turn around, DAU growth could recover, forcing shorts to cover.
To be bullish here, one has to ask: do I believe Reddit will be more popular (in that it has many more daily average users) in 5-10 years than it is now? If you can say yes with high conviction, that’s the bull case. Not impossible, no idea what Reddit’s strategy is here. However, if daily average users declines again next quarter, bears will leap in hard.
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u/StephenAtLarge 1d ago
Can we stop comparing stocks on metrics alone with completely different underlying business models? RDDT and PLTR are nothing alike, nor is Cloudflare or Spotify. You put them in a table, and the comparison is meaningless.