Reddit Inc. (NYSE: RDDT) officially picks up coverage from Oppenheimer who rates the stock as an ‘Outperform’ and sets a price target of $125. At a time when Reddit stock has crashed 49 percent of the ways it has since Feb. 19, the bullish stance on the stock is notable. While Reddit’s decline is steep compared to the NASDAQ’s 16% fall around the same time, analysts at Oppenheimer see opportunity among the volatility.
Though Reddit faces near-term risks and stock scares, Oppenheimer believes the data harnessing company is set up for bigger things: better ability with data for advertising, and using its niche communities, especially.
Determining the Market Pullback and Risks
Like other social media and tech companies, Reddit’s downward stock price movement follows broader trends. For example, similarly, peer company Snap has also lost 27% of its stock value in the last six months. But Oppenheimer says that the current stock price of Reddit therefore accurately reflects its medium-term risk profile. These risks include high dependence on Google, high reliance on DAU, traction limited to international markets not being profitable, and monetization difficulties.
However, despite these DAU increases, Reddit is still able to grow even while metrics like Average Revenue Per User (ARPU) grew by 13% year over year. This gives a sense of Reddit’s capacity to handle an increase in ad impressions without having to reduce cost, a vital feature for the ad-driven revenue model.
Data-Driven Advertising Strategy Stands Out
According to Oppenheimer, what differentiates Reddit is the use of targeted first-party data and the robust subreddit communities. The advertiser’s calling of the shots coupled with these factors make it a magnet for advertisers seeking a precise and engaged audience. Reddit faces great opportunities and potential to develop an advertising business competitively, and its unique position in this digital advertising ecosystem could support that.
Reddit’s beneficial relationship with Google was also highlighted by the firm. Reddit has been gaining value for a growing, lucrative pool of hand-curated search results, hyperlocal news, and homebrew enticement, and it would certainly be an excellent partner or source of content for Google as it continues to face pressure to improve its consumer’s AI offerings.
The Numbers Behind the $125 Price Target
The $125 price target is a forward-looking valuation based on 28 times Reddit’s estimated 2026 EBITDA. This might sound like a high number, but it is fairly close to the median’s growth premium, as in 2024, 2025 and 2026, Reddit’s EBITDA is anticipated to grow by 168%, much faster than any competition. Interestingly enough, Reddit’s trading multiple is much lower than the current price multiples of Snap which has a large negative EV/EBITDA ratio and a high Price Book multiple.
The bullish target is a sign that Oppenheimer thinks Reddit is undervalued in the current market and provides an opportunity for investors to buy in before this growth starts.
Broader Sector Challenges and Reddit’s Edge
Reddit’s view is positive while the broader social media industry faces pressure. Analysts are leaving other platforms like Snap’s ratings mixed, concerned over the protests of user growth, macroeconomic headwinds and ad budget shift. As an example, TD Cowen recently lowered Snap’s price target from $14 to $10 based on poor sentiment toward consumers and the economy.
As opposed to Reddit, which seems to be holding up these headwinds better, strategically speaking. Its differentiated value proposition which is based on community engagement and first-party data gives it an edge in an industry where it has become increasingly challenging to compete on scale and attention.
Final Thoughts: A Contrarian Opportunity?
While an endorsement of Reddit by Oppenheimer might seem like a contrarian bet, it’s a bet based on both a quantitative measure and a potential strategic playing card. Both investors will receive a 63 percent premium for the firm’s $125 target, which implies lots of room up for the firm’s $125 target. Can output scale the user engagement, deepen monetization and continue to keep advertisers interested in a changing digital realm?
