RDDT – Legendary Rating – PT is at $415 – Potential of 151% + upside
Bull Thesis
Upward Surprises to Consider
1- RDDT is underestimated in terms of organic growth
- Based on an analysis using Ahrefs – the organic growth was Worldwide: + 25.6% | US: + 17.7% (Source – Reddit).
- Reddit month over month data increased from November to December by 7% (Source SEM Rush).
2- The bigger the platform, the easier it is to attract budgets from agencies and big companies
- Budget approvers (directors) tend to be a bit older than the average Reddit user. Therefore, it becomes a bit harder to pass media plans if they are not too familiar with the platform. As the network effect grows, it leads to more revenue.
- It can be a true tipping point.
3- Platforms that retain human interaction become more valuable
- This is a surprise potential upside for Reddit. If they manage to put more barriers towards bots, AI agents, they will gain in ad KPI’s and engagement within the community.
- The fact that it’s semi-anonymous, makes it easier for open questions without too much judgement. This is unique and makes it easier to engage with other parts of the community. These types of questions can lead customers towards a great sales funnel.
1- Social media stocks are often discounted
- It becomes harder to predict future cash flow if a big competitor could come and replace the average daily user.
- Every other platform is trying to get their users to stay on it. The competition is ongoing and will remain very strong.
2- ARPU and ROI vs Meta and others
- All advertisers want to increase their exposure to potential clients, but they also want the best ROI on ads.
- As Reddit becomes a more popular option to allocate ad spending, it will also be compared to META and others.
- After the initial spend from that new customer, Reddit will be tested. They need to show strong KPIs.
3- Regulatory & platform Risks
- We are seeing some countries increase their regulatory scrutiny across privacy, data usage, and content
- Some countries now have a minimum age for social media, could lower the future revenue.
Bear Thesis
Downward Surprises to Consider
Final Comments
Reddit is my highest conviction name right now
Reddit is not well understood, which means that there is still upside in the name to surprise Wall Street. The company is winning on all the key metrics, new customers (ad budget), better user engagement and international.
Furthermore, I expect Reddit type of platforms that enables humans to engage with each other will become more valuable as more AI-generated content will be built (Sora videos, project Genie and potentially others).
This is not financial advice, and this is simply for information and entertainment purposes. Do your own due diligence on this and I am simply sharing my thoughts on this security.