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

We came across a bullish thesis on Reddit, Inc. on Outperforming the Market’s Substack by Simple Investing. In this article, we will summarize the bulls’ thesis on RDDT. Reddit, Inc.'s share was trading at $200.76 as of October 15th. RDDT’s trailing and forward P/E were 89.70 and 62.50 respectively according to Yahoo Finance.

Reddit is still in the early stages of monetizing its platform compared to giants like Meta Platforms and Alphabet, but recent trends suggest the company is poised for significant growth. Its return on ad spend is consistently higher than most social platforms, indicating strong efficiency and the ability to capture a larger share of the advertising market. Daily active user growth is outpacing major competitors, supported by ongoing product innovation, which is reinforcing Reddit’s advertising flywheel and driving both retention and expansion among existing advertisers while attracting new customers.

In 2Q, Reddit reported revenues of $500 million, up 78% year-over-year—the fastest quarterly growth since 2022—with advertising accounting for 93% of revenue. Ads revenue specifically rose 84% to $465 million, while other revenue streams, such as data licensing and partnership deals, grew 24% to $35 million. The company’s active advertiser base increased more than 50% from the prior year, reflecting broad-based strength across its ad business. Beyond advertising, Reddit’s proprietary data has become increasingly valuable in the AI era, providing leverage in negotiations with large language model developers for data licensing deals.

Despite its smaller overall share of the digital ad market, Reddit delivers 66% higher return on ad spend than most paid social platforms, demonstrating both efficiency and effectiveness in driving marketing outcomes. This combination of rapid user growth, high ad ROI, and valuable data assets positions Reddit as a compelling growth platform with underappreciated potential. Continued expansion of its advertising business and monetization of data could drive substantial upside, making the stock an attractive opportunity for investors looking for both revenue growth and strategic leverage in AI-driven data markets.

Previously we covered a bullish thesis on Reddit, Inc. (RDDT) by mylizard in December 2024, which highlighted untapped profit potential, monetization challenges, and opportunities to increase revenue through better ad placement and user engagement. The company's stock price has appreciated approximately by 20% since our coverage. The thesis still stands as Reddit expands advertising and monetizes data. Simple Investing shares a similar perspective but emphasizes recent revenue growth and high ad efficiency.

Reddit, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 74 hedge fund portfolios held RDDT at the end of the second quarter which was 72 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.