Evaluating Valuation Following Profit Milestone, Record Earnings, and Data Licensing Gains

If you’re considering what to do next with shares of Reddit (NYSE:RDDT), you’re hardly alone. The company just flipped to profitability and posted its best-ever earnings, propelled by a wave of advertising growth and a jump in data licensing, especially for AI applications. What’s got investors sitting up is Reddit’s new dynamic pricing model for licensing deals, a shift that’s capturing serious attention from analysts and market-watchers alike.

This round of results builds on what has already been a big year for Reddit. From a strong start, the stock has gained over 68% in the past three months and more than doubled investors’ money over the last year. While a surge in data sales to AI players and robust advertising numbers have captured headlines, Reddit’s ability to turn growing user engagement into real profits is what’s shifting the narrative from potential to performance.

With this kind of momentum, the big question is whether Reddit’s market value truly reflects its future growth. Are investors getting in at the right time, or has the stock already run too far ahead?

The most widely followed valuation narrative sees Reddit as priced somewhat above fair value, despite strong growth and profitability momentum driving up analyst anticipation.

Continual product and platform improvements, including a feed redesign, integration of Answers in search, and international expansion, are viewed as multi-year catalysts supporting further user engagement and top-line outperformance.

Wondering what’s behind Reddit’s headline-grabbing price? Analysts are betting on a bold future with extraordinary expansion, breakthrough platform upgrades, and relentless profit acceleration at the core of this outlook. What metrics do they believe will really move the needle? Only a deep dive into this consensus will reveal the numbers that power such an ambitious valuation forecast.

Result: Fair Value of $219.15 (OVERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, ongoing dependence on digital ad revenue and the tough challenge of growing engaged communities internationally could quickly change Reddit’s growth outlook.

Find out about the key risks to this Reddit narrative.

While the popular narrative points to Reddit being priced above fair value, our SWS DCF model offers a different perspective. It suggests the stock could actually be trading below what its long-term cash flows imply. Which outlook will prove more accurate as the market digests new data?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Reddit for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

If you think there’s more to this story or want to see how your own take stacks up, you can quickly create a personal narrative in just minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Reddit.

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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.

Companies discussed in this article include RDDT.

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