Is Reddit Stock Pricing In AI Data Deals After Recent 40.6% Rally?

• If you are wondering whether Reddit's stock price already reflects the hype or if there is still real value left on the table, you are not alone. That is exactly what we are about to unpack.
• After a strong run, with the share price up 3.7% over the last week, 27.1% over the past month, and 40.6% year to date, the market is clearly starting to price in higher growth expectations and possibly a shifting view of risk.
• Recent moves have come alongside ongoing headlines about Reddit's expanding data licensing deals and deepening AI partnerships, which investors see as opening up new high margin revenue streams. At the same time, coverage has focused on how its uniquely engaged community and ad platform might support monetization that is more resilient than a typical social media play.
• Even with all that excitement, Reddit currently scores just 2/6 on our valuation checks, so it is far from a slam dunk on traditional metrics. In the next sections we will break down the different valuation approaches, then wrap up with an even more intuitive way to think about what Reddit might really be worth.

Reddit scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Reddit Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company is worth by projecting its future cash flows and then discounting them back to today in $ terms. For Reddit, the model uses a 2 Stage Free Cash Flow to Equity approach, starting from last twelve months free cash flow of about $504 million.

Analysts provide detailed forecasts for the next few years, and Simply Wall St extends those trends further out. Under this framework, Reddit's free cash flow is projected to rise to roughly $4.75 billion by 2035, implying very strong long term growth as the platform scales advertising and data licensing.

After discounting those future cash flows back to the present, the estimated intrinsic value comes out at about $338 per share. That is roughly 31.0% above the current market price, which in this model indicates that the market may not be fully reflecting the long term cash generation potential implied by these assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Reddit is undervalued by 31.0%. Track this in your watchlist or portfolio, or discover 912 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Reddit.

Approach 2: Reddit Price vs Earnings

For profitable companies like Reddit, the price to earnings, or PE, ratio is a useful way to see how much investors are willing to pay today for each dollar of current earnings. In general, faster growth and lower perceived risk justify a higher PE, while slower growth or higher risk call for a lower, more conservative multiple.

Right now, Reddit trades on a PE of about 126.6x, which is far above the Interactive Media and Services industry average of roughly 16.8x and well ahead of the broader peer group at around 38.0x. That premium signals that the market is already baking in very strong growth and a lot of optimism about the business trajectory.

Simply Wall St also estimates a Fair Ratio for Reddit of about 37.9x. This is a proprietary view of what Reddit’s PE should be, given its earnings growth outlook, industry, profit margins, market cap, and specific risks. Because it blends these company level drivers, the Fair Ratio is more tailored than a simple comparison against peers or the industry average. On this basis, Reddit’s actual PE is substantially higher than its Fair Ratio, pointing to a stock that looks richly priced on earnings.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1463 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Reddit Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St’s Community page. This is where you connect a company’s story to a concrete financial forecast and then to a Fair Value that you can compare against the current price to decide whether to buy, hold, or sell. These Narratives stay up to date as new earnings, news, and guidance arrive. With Reddit, for example, you can see one Narrative that bakes in very bullish assumptions, like revenue compounding above 30% a year, margins rising into the low 30s, and a Fair Value around 240 dollars. Another, more cautious Narrative leans on slower growth, lower margins, and a Fair Value closer to 75 dollars. This shows in one glance how different investors’ stories about engagement, ads, and AI monetization translate into specific forecasts and price targets you can weigh against your own view.

Do you think there's more to the story for Reddit? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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