Key Stats for Reddit Stock
- Current Price: $162.45
- Street Target (Mean): ~$215
- Street Target Upside: ~32%
- Street Target Range: ~$130 low to ~$300 high
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What Happened?
Reddit, Inc. (RDDT) rose 6.39% to close at $162.45 on August 25, and the reason cut against the bear case that has weighed on the stock all year. Shares moved after news reports that Meta is preparing a consumer AI agent, known internally as Hatch, trained to navigate a handful of external services, including Reddit, DoorDash, Etsy, Yelp, and Outlook. For a stock that the market spent the summer punishing on fears that AI would strip its traffic, a report that a major AI product was built to tap Reddit’s content read as demand rather than threat.
Reddit sold off hard after its July 30 earnings, joined the S&P 500 on August 18, and has climbed back since. The business underneath has not been the problem for eight quarters. What the market keeps arguing about is what Reddit’s content is worth in a web where machines increasingly sit between people and the answer, and you saw both sides of that in one session.
A Rumor Moved the Stock, but Nobody Has Signed Anything
The Hatch report needs a careful read. It comes from internal Meta documents reviewed by The Information, not a Meta announcement, and none of the named services, Reddit included, has confirmed an integration. Meta reportedly weighed a premium tier as high as $199.99 per month. So the market reacted to a report, not a deal, and to a real tension inside it: an agent trained to browse Reddit is not automatically a paying customer, and free automated access resembles the very thing Reddit is fighting Google over.
The worry all year was that Google’s AI Overviews would answer users inside the search page and cut the referral clicks that once flowed to Reddit threads. On the Q2 call, CEO Steve Huffman was blunt: “Our visibility on search continues to remain low, and we expect it to probably continue to be volatile.” His answer was that Reddit builds for direct users, and he priced the distinction, telling analysts the direct app users “are worth multiples more than the search referral traffic.” A report that Meta’s agent was trained specifically on Reddit reframes the same AI wave as a pull for Reddit’s corpus.
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The Print the Selloff Kept Ignoring
Revenue grew 61% year over year to $804.91 million, the eighth straight quarter above 60%. Advertising revenue rose 64% to $762 million. GAAP net income more than doubled to $253 million, GAAP diluted EPS was $1.25, and adjusted EPS came in at $1.77 against a $1.45 estimate. Adjusted EBITDA reached $342.81 million, a 42.6% margin. The operating margin leverage was just as clear: adjusted operating expenses fell to 49% of revenue from 57% a year earlier, and operating cash flow crossed $1 billion on a trailing basis for the first time.
Global daily actives grew 18% to 130.3 million, but U.S. daily actives slipped sequentially, and management flagged the referral choppiness pressuring the top of the funnel. Huffman’s fix is engagement, and he was specific about the runway: Reddit’s feed models are “significantly smaller” than state-of-the-art, update in days rather than minutes, and ingest only about 10% of user activity, leaving what he called “order of magnitude improvement opportunities.” New app-user retention rose 50% year over year on a relative basis off a small base. That gap, accelerating financials against a wobbling U.S. user count, is what drove the stock down more than 20% over the sessions following the print, despite the beat.
Shares trade at 7.35x next-twelve-month EV/revenue, well above the peer mean near 2.7x and names like Pinterest at 2.56x and Snap at 1.62x. That holds only while Reddit grows several times faster and converts it to cash, which it does: trailing gross margin tops 91% and free cash flow is compounding. The multiple prices Reddit as the rare social platform with both hypergrowth and profitability, and leaves little room for a user stall before it resets.
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TIKR Advanced Model Analysis
- Current Price: $162.45
- Street Target (Mean): ~$215
- Street Target Upside: ~32%
- Street Target Range: ~$130 low to ~$300 high
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The Street mean sits at $214.84 across 32 analysts, roughly 32% above today’s price, with a spread from about $130 to $300 that captures how unsettled the debate is. Two drivers underpin the bull case: advertising scale, as Reddit Max adoption and international growth lift ARPU, and data licensing, which Huffman frames as an expanding marketplace with more buyers than Google and OpenAI. Supporting both is the operating leverage already in the numbers, the drop to 49% adjusted OpEx, and the $1 million in revenue per employee Reddit just crossed.
The risk is concrete now: U.S. daily actives fell sequentially this quarter, and if referral loss keeps outrunning direct-user gains, revenue decelerates, and a 7x revenue multiple does not hold. The upside case is that feed and app-conversion work compounds retention, referral loss fades to noise, and a licensing renewal closes. The downside case is a reset toward peer multiples if the funnel keeps leaking, which would put shares near their 52-week low around $119.
Conclusion
The next real test is retention, and it has a date. Reddit reports Q3 on or around October 28, guiding revenue to $860 million to $870 million, roughly 48% growth at the midpoint. Watch two lines above the headline: U.S. daily active users, which need to stop sliding, and new-app-user retention, which needs to keep climbing off its small base. If U.S. dailies stabilize and retention holds, the summer selloff looks like a gift, and the Hatch bounce looks like the first sign of a re-rating. If U.S. dailies fall again, the beat won’t matter, as it didn’t in July. A confirmed Hatch integration or a signed licensing renewal would sharpen the bull case, but neither exists yet, so the burden of proof sits with the users.
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Should You Invest in Reddit?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
