The average target price of RDDT is 159 and suggests 10% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 220.0. This translates into 52% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 75.0. This is equivalent to 48% downside potential in the worst case. 

Reddit, Inc. operates a website that organizes digital communities. It organizes communities based on specific interests that enable users to engage in conversations by sharing experiences, submitting links, uploading images and videos, and replying to one another. The company was founded in 2005 and is headquartered in San Francisco, California. Reddit, Inc. operates as a subsidiary of Advance Publications, Inc.

Reddit, Inc.

Communication Services

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

RDDT reported revenue of USD 1 450mn in the last 12 months, up 11% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. Market expects EPS to reach USD -4.06 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 27ppts over six months and grown 4ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 2.0% in the last 12 months, up from -15.7% in FY23. 

Historically, RDDT has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 8.1%, a growth from -11.3% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 6.3%, below the peers. The consensus estimate for FY24 for RoCE is -25.3%, again behind the peers. 

Another important profitability metric, return on assets (RoA), amounted to 5.8% in the last 12 months, an increase from -5.7% in FY23. The market analysts predict that RoA will be -15.0% in FY24, again weaker than its peers. 

Reddit, Inc. reported a return on equity (RoE) of 6.4% in the last 12 months, up from -6.2% in FY23. The market consensus projects an RoE of -16.7% in FY24, again behind its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.2 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

RDDT boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually quite stable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth, low margin volatility, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to bleak profitability, negligible return on capital, and poor working capital management.

In highly turbulent market conditions, RDDT is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, RDDT is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense. 

Considering past and projected metrics, the stock is distinctly 'expensive' compared to its peers. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, overvalued on P/FCF. 

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Reddit, Inc.

$ 151.6

2

Reddit, Inc.

$ 151.6

2

Risk factor

Profitability factor

Risk / Profitability

About

About

Risk factor

Profitability factor

$ 151.6

About

About

Reddit, Inc.

$ 151.6

2

Reddit, Inc.

$ 151.6

2

Risk factor

Profitability factor

Risk / Profitability

About

About

Risk factor

Profitability factor

$ 151.6

About

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