Reddit, Inc. (RDDT): A Bull Case Theory

We came across a bullish thesis on Reddit, Inc. on Sleepysol’s Newsletter’s Substack by Sleepysol. In this article, we will summarize the bulls’ thesis on RDDT. Reddit, Inc.'s share was trading at $188.64 as of August 1^st. RDDT’s trailing and forward P/E were 84.21 and 149.25, respectively according to Yahoo Finance.

Reddit has recently surged following the announcement of a new AI feature, combined with being the only major website to post visitor growth in recent weeks. This bullish momentum contrasts sharply with prior bearish arguments around slowing user growth and AI-driven risks, which seemed compelling when shares traded near $250. However, at $115-$120 with 15% of its market cap expected to be in cash within a year, the stock offered an attractive setup. On Tuesday, it rallied to $145, marking a nearly 50% gain in a month.

While short-term uncertainty persists, the long-term thesis remains intact and stronger than before. Reddit has effectively consolidated what used to be a fragmented internet of blogs and forums, emerging as the primary destination for community-driven discussions after the decline of platforms like Digg. As AI reduces reliance on traditional web searches, Reddit’s role as a real-time, user-generated content hub makes it indispensable for search relevance. Unlike platforms dominated by video content and plagued by bot-driven engagement, Reddit’s text-based structure and topical depth position it as the last major source of authentic, evolving data.

With 20%+ user growth, international expansion ahead, and ARPU optionality, revenue and profitability could inflect meaningfully, propelling shares into the $200 range over time. In the near term, volatility driven by user growth metrics and trader sentiment may persist, but the platform’s strategic importance in an AI-driven internet ecosystem underpins its long-term value. At current levels near $140, upside potential remains compelling, with a personal fair value estimate of $160 and significant multi-year growth optionality.

Previously, we covered a bullish thesis on Reddit, Inc. (RDDT) by mylizard in December 2024, which highlighted poor monetization, declining engagement incentives, and untapped advertising potential. The stock has appreciated about 12.8% since our coverage, as optimism grew despite unresolved issues. The thesis still stands as monetization remains key. Sleepysol shares a similar view but emphasizes Reddit’s role as an essential AI-era content hub.

Reddit, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 72 hedge fund portfolios held RDDT at the end of the first quarter which was 87 in the previous quarter. While we acknowledge the potential of RDDT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.