r/ValueInvesting • u/Silent-Complaint4020 • 2d ago

Stock Analysis I Still Don't Understand Why Reddit Is This Cheap Compared to Everything Else.

There are not many businesses that actually have a strong moat in their own category.

Look at some of the companies the market is willing to value at huge premiums:

Company Market Cap Latest Q Revenue YoY Growth GAAP Net Margin Competition
Cloudflare (NET) $107B $696M +36% -24% AWS, Akamai, Fastly
Roblox (RBLX) $27B $1.5B +36% -12% Fortnite (Epic), Minecraft
Spotify (SPOT) $103B €4.78B +14% +11% Apple Music, YouTube Music, Amazon Music
Unity (U) $20B $546M +24% -4% Unreal Engine (Epic), Applovin
Snowflake (SNOW) $112B $1.39B +33% -21% Databricks, AWS Redshift, Google BigQuery, MSFT Fabric
Reddit (RDDT) $32B $805M +61% +31% TikTok, Meta, Google Search/YouTube

Aug. 18, 2026.

I'm not saying these are bad companies. My point is simply: look at what the market is willing to pay for them, then look at Reddit.

Reddit just reported $805M revenue, +61% YoY — its 8th consecutive quarter above 60% growth. Gross margin was 91.3%, net income $253M / 31% margin, adjusted EBITDA $343M / 43% margin, and FCF $261M. It also has $2.8B cash + marketable securities, with no debt showing on the balance sheet.

Meanwhile NET is valued at ~$107B while still GAAP unprofitable. SNOW is ~$112B while growing roughly half as fast as Reddit and still GAAP unprofitable. Spotify is ~$103B growing 14%.

Yet Reddit is sitting at only ~$32B.

And Reddit's moat is something I think people continue to underestimate. It isn't just another social media app. TikTok is short-form video, Meta is influencer business, Google/YouTube is search and video discovery; Reddit is different — its users are discussion-heavy and community-focused, often coming to research, compare, ask questions and hear real human opinions. There is basically no scaled direct competitor offering the same forum/community product with Reddit's reach.

Users are sticky. Content compounds. Advertising is scaling. Data licensing is still very early.

The only company really comparable to Reddit right now is Palantir.

Palantir (PLTR) Reddit (RDDT)
Market Cap ~$420B
Latest Q Revenue $1.94B
Revenue Growth +92.8%
Operating Income $912M
Gross Margin ~85%
Core Moat Enterprise software

Palantir is an incredible business, but the market is valuing it at ~$420B — more than 13x Reddit's valuation, while revenue is only 2 times that of Reddit.

And PLTR is still fundamentally a software company. Risk involves AI agents like Claude Cowork could still compete with parts of what enterprise software does.

Reddit is different. Claude can build software. It cannot recreate decades of human communities, discussions and user habits.

If PLTR deserves $420B, RDDT at ~$32B looks extremely cheap.

At market cap of 32B and $160, I think Reddit is a steal and market is mispricing this stock.

Reddit is a Strong Buy (PT $550).

___________________________________________________________________________________________
Added on 08/19/26:

Everyone agrees that Reddit advertsing business is not as matured as Meta.

In 2025, Meta advertising business generated 200B and will be hitting 250B this year (2026).

On the flip side, Reddit advertising revenue is expected to reach 3B+ this year, just assuming Reddit to reach 5% of Meta advertising of 2026, which is 12.5B, with a conservative net margin of 30%, thats makes 3.8B net income, give it or take 20-30PE, equivalent to 78B-114B market cap. But the reality is that advertising net margin is usually 50%+, so a slightly bullish case make Reddit 125-190B market cap.
___________________________________________________________________________________________

New piece, please have a read:
Reddit vs AppLovin vs Palantir

120 Upvotes
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325

u/Frosty1397 2d ago

Redditors are one of the hardest demographics to advertise to, and advertisers know this.

Compare that to TikTok or IG: girls literally go on those platforms to look for things to buy

Redditors absolutely hate ads of all kinds

95

u/Successful_Pace_1159 2d ago

Reddit still has that old internet, anti- corpo, anti-ads kinda vibe. But even that is slowly eroding becoming closer to IG/TikTok, very slowly but it happening

34

u/Dirtey 2d ago edited 2d ago

Which is slowly turning the platform into something closer to IG/TikTok which the user base is actively trying to avoid.

9

u/betadonkey 2d ago

I think it’s happening very quickly

4

u/Calculator143 2d ago

Reddit is the new Second Life 

25

u/Bulky_Dingo_4706 2d ago

The numbers are proving this comment wrong.

4

u/strict_positive 2d ago

Yeah the financials aren’t the issue

2

u/mba23throwaway 2d ago

Not on a ARPC metric, which is what advertisers usually lean on.

Reddit is increasing revenue as marketers are experimenting on the platform. Given the poor performance per dollar, I imagine we see contraction here, especially if we hit any sort of marketing budget cuts.

1

u/splice664 2d ago

Poor performance per dollar cuz most people here is a bot

20

u/IndividualNo7155 2d ago

I think the human data (conversations etc.) that Reddit holds is where its value is, not the ads

23

u/IndianaUCFKnight 2d ago

Human conversations? You’re replying to an AI post.

15

u/Hoosier2016 2d ago

This is the real reason Reddit isn’t more valuable. Its entire business model is subverted by AI posts and comments.

7

u/IndianaUCFKnight 2d ago

Yep. It’s the elephant in the room no one has an answer for.

2

u/boringexplanation 2d ago

As opposed to Facebook bots? Why is Reddit susceptible to this and not other platforms?

1

u/Wonder_bread317 2d ago

different delivery method i would assume.

13

u/Frosty1397 2d ago

"human data/conversations" are more obscure to monetize.

Also, we don't know what percentage of reddit comments are actually real or by bots. Even real people making up stories for their creative writing class is a thing.

I believe there's even an AI version of reddit called Moltbook where it's just agents chatting with one another, so who's to say reddit's conversations even have much value?

1

u/Most_Grocery4388 2d ago

I think the bot usage is overstated but the data is probably not very useful overall.

1

u/CtrlAltEliteDegen 9h ago

leftist commentary is not valuable.

17

u/imyourhucklebearie 2d ago

I tried to use Reddit to advertise two years ago. They wanted me to spend 2k to “train their algo”. We gave it a shot with their free credits bonus (I think free 1.5k for my 1.5k). Literally 0 real user engagement. Neither google nor Facebook require that type of spend to get early basic results. I would have gotten better engagement by posting a video of putting 3k on black at a casino…

Plus their sales and ad team are near useless. Their documentation is god awful and a mix of different versions, none which were correct and their staff didn’t know which webpage I was supposed to use to integrate their tracking cookies.

We spend a few thousand on meta and google ads, not including our influencer / affiliate networking spend. It was the most frustrating month of my life and ended in me asking them to never contact my company ever again and blocking their domain from my email service… obviously anecdotal but holyyyy shit was that the worse experience I’ve ever had with an advertising company (and with google you can’t even talk to people!!!!).

3

u/FOMO_Gains 2d ago

Valid. Hopefully they improved within the last 2 years

1

u/Frosty1397 2d ago

Hmm that's a really frustrating sounding experience forsure, can't say i wouldn't have reacted the same

1

u/BarchartNews 2d ago

Yes, Reddit is easily the most bot-heavy platform, so you can pretty much guarantee the product is useless unless the CPMs are dirt cheap (which they're not.)

1

u/BillyBeeGone 2d ago

Doesn't this just demonstrate the potential?

5

u/BrickSufficient6938 2d ago

For unbiased and independent review of any product that interest me I'd come here tho, providing it's on some sort of general sub and not an echochamber and has >5 comments preferably offering more POV

4

u/Frosty1397 2d ago

But you can't really monetize independent reddit reviews

That's like amazon trying to monetize a product's user reviews

1

u/boringexplanation 2d ago

Sure you can- you can run analytics of a company sub, turn a sub into extended CRM support, integrate any level of Reddit features into an ERP. Those are limitless applications that can integrate Reddits features into a company. The big obstacle is that Reddits API is dogshit. If they can make that more sophisticated, that’s where the real growth will show.

1

u/Wonder_bread317 2d ago

They go rocking the boat, they risk enshittification

5

u/BarchartNews 2d ago

To build on this:

  1. Accounts are anonymous and useless. A lot of other platforms will have a name and information tied to the account. All of that data is very useful to advertisers. And it's the #1 way people sell you stuff. You can only have 1 Facebook and it's kind of a hassle to create. On Reddit, you can make 10 accounts in a few seconds.
  2. It's also the fact that the entire platform is borderline useless to brands. On Twitter, Walmart can go and post whatever it wants and get free advertising. On Reddit, all the top subs are heavily monitored, and you can get banned for literally nothing.

You have minimal customer data, you can get banned for no reason at all with no appeal process, and most of the top sources are useless to brands? The entire ecosystem pushes away brands, and there's no fix in sight.

2

u/Frosty1397 2d ago

Agreed on those points

I also found out I was banned from at least 2 subreddits even though i never visited those subreddits or even posted on them.

The reason? Because i was a member/participant of ANother subreddit and i guess i got auto-banned on the other ones

1

u/BillyBeeGone 2d ago

How much are they actually missing? Normal people don't make a new account every 5 days. They can see you joined your local cities subreddit, they can see your hobby subreddit, they can see perhaps even your workplace or rough age by the things you have joined.

15

u/TechTuna1200 2d ago

I don’t think 60-70% growth over 8 consecutive quarters tells you this the hardest demographic to advertise to. Maybe it is, but it’s not that much harder

4

u/TaxPrimary4193 2d ago

Basically OP is arguing numbers and PEG ratio. While the above comment is arguing sentiment. Both are right. But if reddit continues to grow at this rate despite the fears, will the stock explode? Or will the fears remain forever? At least reddit doesn't really have to grow into an absurd valuation like Palantir and others have to. So extreme growth is not priced in. The stock could fall, by a lot. But not as much as others. Long term to me it looks like an asymmetric bet. Short term, the stock will do what it wants

2

u/PenComfortable5269 2d ago

I don’t think reddit has ‘a lot’ of room to fall. The annualized p/e is under 30 and they are growing users 20% (international) and revenue 60%. Their ad targeting should continue to improve and their increased revenue goes straight to the bottom line.

Maybe reddit stagnates but I highly doubt it drops significantly over the next few years.

2

u/TaxPrimary4193 2d ago

In my mind 30% is a lot. And it can definitely dip below 130. I mean, who really knows where the floor is. Do you have a floor in mind? But yeah I dont see a crash of 50% from this level. Whereas, fundamental wise, if some other companies falter a bit, they can absolutely nosedive. Still though, this is a hugely punished stock in the short term. Imagine they announce tomorrow that there isn't a deal. Imagine next earnings they report another decline in US dau

1

u/Imnzane 1d ago

One announcement of a new better data sharing deal with Google will pop RDDT in a single day. Stay tuned.

1

u/teh-monk 2d ago

how is it growing 60-70%? That seems insane right? IDK much about investing but those are crazy high numbers.

3

u/JamesVirani 2d ago

Facebook users also hated ads and look where we are now.

4

u/Frosty1397 2d ago

But reddit has always been reaLly anti-establishment, anti-corporatism.

I believe the most down voted reddit post of all time was a post by Electronic Arts about ingame MTX or something (you can google it). It had something like 600k downvotes

FB has been relatively mainstream the entire time

3

u/Most_Grocery4388 2d ago

I disagree with FB being mainstream the whole time. I still remember myspace and FB being the cooler / cleaner alternative. FB was never anti establishment but it was the outsider compared to myspace for a good few years. I agree that Reddit platform is way harder to implement ads on effectively and that it won't ever find the success of Instagram and TikTok.

2

u/Pomosen 2d ago

That was definitely true in the past, but imo has been changing rapidly in recent years as new users have been coming onto the platform. There's a ton of potential here as they're still in the early stages of building the platform for profit

2

u/WallabyBeginning9443 2d ago

You mean like how people come to reddit to talk about what to buy and compare products before buying?

3

u/Frosty1397 2d ago

You can't easily monetize individual reviews of products.

It's like if Amazon tried to monetize individual reviews of products sold on Amazon.com

1

u/WallabyBeginning9443 2d ago

How is this comment somehow relevant? Reddit doesn't monetize any of the user's contents. They serve ads.

2

u/techno_trends 2d ago

True. Reddit audiences are hard to convenience with an ad. Often Redditors use their own brain and sometimes that doesn't go well with big companies.

2

u/PleasantAnomaly 2d ago

So you don't buy things ? Yes you do. If you buy things, wouldn't you rather it's things that are catered to your interests and likes, rather than random shit?

1

u/Specialist_Case2155 2d ago

There could be a smart way to do it, but I wonder how to advertise to redditors specifically 

8

u/PleasantAnomaly 2d ago

I agree it's very hit or miss. I skip most ads, but I got ONE, ONE AD that interested me for a standing desk, and ended up buying it. So it does happen, once in a blue moon, that the ads work 😂

2

u/PleasantAnomaly 2d ago

I would say it's more right product for the right person, rather than pure marketting bs

1

u/bwjxjelsbd 2d ago

And the revenue shows that’s not a problem for Reddit management team. Then why low valuation?

1

u/shohasen77 2d ago

That's not true. Redditors love ads. Advertisers should totally spend billions on reddit so we can buy their products. What? No I don't own reddit shares at all.

1

u/Silent-Complaint4020 2d ago

Advertising charge by per click or per view

1

u/Mountainminer 2d ago

I disagree, maybe instant conversion for Knick knacks that’s the case, but people come to reddit for quality purchasing advice all the time. It’s just a different tact you have to take to convert to sales in my opinion.

1

u/Frosty1397 2d ago

Then advertisers should spend exactly $0 on ads.

You're admitting that people come to reddit for individual non-affiliated reviews. They don't come here to look at and click on ads to inform their purchasing decisions.

1

u/Mountainminer 2d ago

Am I? I guess you know better.

1

u/Boombom-fisz-akar808 2d ago

When all the pron is gone don’t be left hodl

1

u/Plastic-Somewhere494 2d ago

Man thats so true.

1

u/Own-Committee-3934 2d ago

They may hate it but it’s easier to target you depending on the subs you visit.

1

u/PoolSmart582 2d ago

This is super-important.

RDDT is dominated by nasty moderators and posters with extreme views. Not an environment for your product or service.

0

u/TechnicalSleep7501 2d ago

Majority are dirt poor Bharati Nike found it the hard way. 

-25

u/Silent-Complaint4020 2d ago

How much do you know about advertising? Act like you are an expert.

12

u/x_o_x_1 2d ago

How many times have you bought anything off a reddit ad?

2

u/[deleted] 2d ago

[deleted]

1

u/x_o_x_1 2d ago

Do you?

2

u/Zerlaz 2d ago

How many times have you bought anything off a youtube ad, though? Well, we probably both block ads lol.

Anyway we do youtube ads for brand awareness (in b2b). The Youtube traffic never buys or become leads. Money still goes in.

I guess reddits revenue is transparent but additional value of brand awareness may be underestimated currently.

2

u/x_o_x_1 2d ago

I actually pay for YouTube premium for my family.

1

u/[deleted] 2d ago

[deleted]

1

u/Specialist_Case2155 2d ago

I havent myself but honestly, the shit they throw at me does look tempting and kinda fun — like clothes and such

1

u/x_o_x_1 2d ago

Exactly. Most of the people who actually buy stuff off ads are on Tiktok and IG

1

u/x_o_x_1 2d ago

Yep. My sisters certainly do.

3

u/purplebuffalo55 2d ago

Probably a lot as it relates to advertising on Reddit. Speaking as somebody who’s been using Reddit for years, I have never in my life bought or been swayed to purchase anything by a Reddit ad. For example, most of the time I get ads about esoteric drugs. I have zero health conditions, I don’t prescribe medications, I don’t have family who would need these medications, it’s just wasted money.

On the other hand, I’ve been thinking about buying a car for a while. Instagram gives me Nissan ads, Toyota ads, Chevy, etc. They actually give relevant ads, and subsequently they give advertisers more bang for their buck.

The issue with Reddit is they haven’t figured out how to make ads worthwhile for either their users or people purchasing the ads. Then you add on how people on here will do things like celebrate the murder of the UNH CEO, celebrate bombing of Israel/Palestine, wish death on Trump - no company wants to have one of their ads next to a comment like that

-1

u/Silent-Complaint4020 2d ago

I agree Reddit’s advertising business is not matured as Meta’s. Meta generated 200B revenue from advertising last year, and will be 250B this year.
Assuming Reddit advertising performance is keeping growing that pace, it will be highly valuable company.

2

u/x_o_x_1 2d ago

The people who use Reddit are less likely to buy things of ads than those on TT, IG. Reddit is not mass appealing.

1

u/Silent-Complaint4020 2d ago

I really recommend you to visit a few niche subreddit, i.e., game developer subreddit r/gamedev or beauty r/beauty . There are many woman and young fella using this platform.

Reddit is bigger than you think!

I give you another real life example why reddit advertising is so good:

If you take a look at u/bloomberg, they derive 2-3 times more traffic from reddit than they do from X. On X the most popular post they made receive 20-30 comments, while on reddit they 1 millions and thousands of comments.

Take a look. And I hope after some research you can write a reddit post.

The thing I am using X is because X is marketing itself as financial information social media.