Reddit's fair value estimate has increased by approximately $6 to $228.50, reflecting analysts' expectations for stronger revenue growth and improved margins. This is supported by recent price target upgrades across the Street.

Analyst Commentary

Analyst sentiment on Reddit has been dynamic in recent weeks, with several firms updating their price targets and offering perspective on both the company's upside potential and ongoing risks.

Bullish Takeaways

• Bullish analysts continue to raise price targets, some above $300, citing momentum in Reddit's advertising and data licensing businesses as well as robust top-line growth estimates into 2025 and beyond.
• Recent upgrades reflect confidence in emerging monetization avenues, such as dynamic product ads. Expectations are that these initiatives could provide clear evidence of further growth potential if successful.
• Multiple firms point to catalysts ahead, including product and feed redesigns, improvements in search and answers integration, and continued monetization progress. These developments suggest revenue outperformance could persist.
• Several analysts noted that even as engagement trends may fluctuate, upside surprises in revenue and EBITDA could continue if user additions meet or exceed expectations in key regions such as North America.

Bearish Takeaways

• Bearish analysts remain cautious about softening user engagement trends, with some adjusting daily active user estimates downward and flagging divergence between user growth and advertising revenue in the near term.
• Recent third-party data indicating a drop in Reddit’s daily active user counts and a significant decrease in citation share on external platforms like ChatGPT has weighed on sentiment and contributed to stock volatility.
• Valuation remains a concern for some, with questions about whether recent revenue and margin improvements are already priced into the stock. This is especially relevant in light of tougher second-half revenue comparisons.
• Analysts also highlight potential external headwinds, such as increased regulatory scrutiny or changes in ad spending in sensitive categories, which could limit Reddit's advertising exposure compared to peers.

What's in the News

• Brands are significantly increasing their ad spend on Reddit. Ad buyers report a surge in both paid campaigns and organic strategies to improve visibility on the platform, particularly as its influence on AI-powered search grows (ADWEEK).
• Reddit has filed a lawsuit against four companies accused of illegally scraping its data for use by AI firms. The company is seeking financial damages and a permanent injunction to stop the sale and use of the data (The New York Times).
• Reddit is in early discussions with Google regarding a new content-sharing agreement that could lead to deeper integration with Google's AI products. This follows a previous $60 million deal (Bloomberg).
• Recent earnings guidance from Reddit estimates third quarter 2025 revenue between $535 million and $545 million, signaling 54% to 56% year-over-year growth.
• Analysts have raised concerns about potential long-term disruptions to Reddit's user traffic and advertising revenue caused by new AI features rolled out by Google Search, which is impacting its stock price (multiple sources).

Valuation Changes

• The Fair Value Estimate has increased modestly to $228.50, up from $222.38, reflecting analyst revisions.
• The Discount Rate has decreased fractionally to 7.86 percent, down from 7.86 percent, indicating a minor change in risk assumptions.
• Revenue Growth projections have risen slightly to 34.65 percent from 33.94 percent.
• Net Profit Margin expectations have grown to 29.29 percent, up from 28.81 percent.
• The Future P/E Ratio has edged down slightly to 54.33 times, compared to 54.61 times previously.