Reddit set to catch up to tech giants
While a small niche player in social media and not yet profitable, Reddit boasts a unique platform, high gross margins, outsized growth among high-value US users, and a strong focus on improved monetization. These factors should drive a closing of the gap to peers.
Reddit (RDDT) went public at $34 per share and shoot up to touch $70, but has since retreated to mid-$40s, creating a buying opportunity. With emphasis on communities and common interests, distinguishing itself from other social media platforms, Reddit's growing user base, mainly in the U.S., provides a strong opportunity for growth and monetization.
While the operations are not yet profitable, we see a fair chance for a multiple expansion to 6x current-year revenue, mainly because it's a unique platform with a wide moat, positive user metrics, and a nascent ad machine with room to grow.
Let's dive in.
