Key Stats for Reddit Stock
- Today’s Performance: 10%
- 52-Week Range: $119 to $283
- Valuation Model Target Price: Around $220
- Implied Upside: Around 41%
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What Happened?
Reddit Inc. stock jumped about 10% today, closing near $155 per share as investors reconsidered whether Friday’s steep post-earnings selloff had gone too far. Shares had fallen about 21% after the company disclosed volatile traffic from external search engines, even though revenue, earnings, and third-quarter guidance exceeded expectations. The rebound reflects the market’s central debate around Reddit: whether unstable search referrals outweigh one of the fastest-growing advertising businesses among major social platforms.
The stock rose specifically because buyers placed greater weight on Reddit’s advertising momentum, improving profitability, and strong outlook after the initial reaction centered heavily on user-growth risk. Global daily active uniques increased 18% to 130.3 million, but U.S. daily users slipped slightly from the previous quarter as search referrals became more volatile. That tension matters because direct and app users return more frequently and are worth multiples more than occasional visitors arriving through search, giving Reddit more opportunities to serve ads and build durable engagement.
This past week, Reddit reported Q2 revenue of $805 million, up 61% year over year, as advertising revenue increased 64% to $762 million and adjusted EBITDA reached $343 million, representing a 43% margin. Management guided for Q3 revenue of $860 million to $870 million and adjusted EBITDA of $385 million to $395 million, while new app-user retention improved 50% year over year on a relative basis. CEO Steve Huffman said Reddit is “building a daily destination,” capturing the company’s strategy of converting occasional web visitors into higher-value direct and app users.
Analyst revisions captured the divide between Reddit’s commercial strength and its traffic risk. Jefferies raised its price target from $225 to $250 and maintained a Buy rating, while Oppenheimer lowered its target from $225 to $200 but retained an Outperform rating and Piper Sandler reduced its target from $215 to $195 while keeping an Overweight rating. Reddit also competes with Meta, Pinterest, and Snap for digital-advertising budgets, but its 61% revenue growth significantly exceeded Meta’s 28%, although Meta’s 31% operating margin and far greater scale make it the more mature profitability benchmark.
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Is Reddit Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): Around 36%
- Operating Margins: Around 32%
- Exit P/E Multiple: Around 17x
The model’s revenue assumption reflects consensus estimates showing Reddit’s annual sales rising from about $2.2 billion in 2025 to around $5.5 billion in 2028. Growth is expected to slow from around 53% in 2026 to 31% in 2027 and 24% in 2028, making the forecast ambitious but consistent with the attached consensus path rather than assuming Reddit can maintain its current 61% quarterly pace indefinitely.
Reddit Max is one of the clearest levers behind those estimates. The automated advertising platform uses machine learning to create and optimize campaigns, making Reddit easier to use for smaller businesses without large marketing teams. The number of advertisers using Max increased more than 60% from Q1, while revenue generated through the product rose more than 150%.
Lower-funnel products could also increase how much businesses spend on Reddit. Dynamic product ads connect retailers’ catalogs with relevant discussions, app-install campaigns help companies acquire users, and shopping-listing ads place products beside conversations where people are already comparing purchases. Revenue from dynamic product ads and app-install campaigns each more than doubled year over year, showing that Reddit is expanding beyond brand awareness into advertising tied more directly to sales.
The roughly 17x exit P/E assumes Reddit receives a lower earnings valuation as the business matures and growth slows. That limits the model’s reliance on multiple expansion and places most of the projected return on actual revenue, margin, and earnings growth. Based on these assumptions, TIKR’s valuation model estimates Reddit stock could reach around $220 by the end of 2028, implying approximately 41% upside from the latest closing price near $155. The target is a 2028 valuation output, while execution through the remainder of 2026 will determine whether Reddit remains on track to reach it.
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The EBITDA chart strengthens the profitability case. Consensus estimates project EBITDA increasing from around $850 million in 2026 to approximately $2.1 billion in 2028, while EBITDA margin expands from around 45% to 48%. This suggests analysts expect Reddit to convert more of each additional advertising dollar into profit as revenue grows faster than its operating cost base.
The roughly 32% operating-margin assumption appears demanding but defensible. Reddit’s trailing EBIT margin was already around 28%, while Q2 gross margin reached 91.3% and adjusted operating expenses declined to 49% of revenue from 57% one year earlier. The EBITDA margin shown in the chart is higher because EBITDA excludes costs such as depreciation, amortization, and stock-based compensation, so it should not be treated as equivalent to operating margin.
Results over the next 12 months will depend on improved feed recommendations and onboarding converting more occasional visitors into frequent app users. Reddit Max could attract more small and midsized advertisers by simplifying campaign creation and improving results. Dynamic product ads, app-install campaigns, and shopping listings could capture more spending tied directly to purchases and customer acquisition. International monetization could become more meaningful as Reddit expands local-language content and advertiser coverage in markets where user growth remains faster but revenue per user remains lower.
At current levels, Reddit appears undervalued under the model’s assumptions, but reaching the modeled value requires direct-user growth and sustained margin expansion to outweigh continued volatility in external search traffic.
How Much Upside Does RDDT Stock Have From Here?
Investors can estimate Reddit’s potential share price, or what any stock could be worth, in under a minute using TIKR’s New Valuation Model tool.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
