Strong user growth and revenue driven by artificial intelligence should boost shares of Reddit , according to Evercore ISI. Analyst Mark Mahaney initiated coverage of the social platform with an outperform rating. His $320 price target is approximately 31% above Monday’s close. Mahaney wrote that the stock’s current valuation is “very robust but reasonable.” “While the stock has performed well (+40+% in the last 12 months), we still see significant opportunity for RDDT to gap up its [average revenue per user], based on industry comps, recent product launches (e.g. R-Max), & feedback from our ad checks,” he added. RDDT 1Y mountain RDDT 1Y chart Mahaney said Reddit can sustain global user growth, pointing to an international user base that is expanding materially faster than the U.S. and products such as Reddit Answers, its AI-powered information summarizer — that is boosting engagement. The platform’s daily average users and weekly average users are compounding at double-digit rates. He also believes that management is making moves to convert search-driven and logged-out traffic via a simpler onboarding flow and more personalized home feed. The analyst also pointed out that Reddit could be an artificial intelligence beneficiary. “We believe that Reddit’s corpus of > 2B posts and > 20B comments is a foundational training source for many leading LLMs, and mgmt. is now formalizing that role through content-licensing agreements expected to generate > $200M in high margin revenue over the next couple years,” he wrote. Mahaney noted Reddit trades at a premium against peers such as AppLovin and Roblox. This is justified, he said, by “Reddit’s faster topline growth, impressive margin trajectory, and incremental optionality in data licensing & the user economy.” “Perhaps more important, in terms of its revenue growth outlook, we believe that RDDT is more likely to sustain premium (20-30%+) revenue growth because it has high-intent, Search-like inventory,” the analyst added.
