Is RDDT a good stock to buy? We came across a bullish thesis on Reddit, Inc. on r/ValueInvesting by ajkomajko. In this article, we will summarize the bulls’ thesis on RDDT. Reddit, Inc.’s share was trading at $173.45 as of June 5th. RDDT’s trailing and forward P/E were 52.55 and 40.49 respectively according to Yahoo Finance.
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Reddit, Inc. operates a digital community in the United States and internationally. RDDT is presented as a structurally mispriced business whose financial performance is already exceeding Wall Street’s expectations by a wide margin. The company reported Q1 2026 earnings per share of $1.01, substantially ahead of the $0.62 consensus estimate and even above the current Q1 2027 consensus forecast of $0.98, suggesting that analysts continue to underestimate the company’s earnings power.
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Following the quarter, consensus 2026 net income estimates were revised upward from $871 million to $1.014 billion, yet the investment case argues that expectations still fail to reflect Reddit’s true profitability potential. A key source of this disconnect is margin assumptions. Reddit generated a 65.7% incremental net income margin in Q1 2026, up significantly from 45.5% in Q2 2025, while consensus forecasts assume net income margins remain around 30% and incremental margins decline over the coming years.
Given the company’s 91% gross margins, minimal capital expenditure requirements, scalable platform economics, and reliance on volunteer moderators, the thesis contends that there is little operational justification for meaningful margin compression as revenue grows. Several potential catalysts could further unlock value.
The recent Anthropic ruling strengthened Reddit’s position in licensing and data-related disputes, increasing the likelihood of settlements and commercial agreements that could create additional revenue opportunities while establishing precedent for other pending cases and future renewals with major AI partners.
At the same time, improving app adoption trends suggest concerns around U.S. user growth may be easing. With earnings materially ahead of expectations, margins potentially underestimated, and multiple catalysts on the horizon, Reddit is viewed as offering substantial upside as investors reassess its long-term earnings trajectory.
Previously, we covered a bullish thesis on Reddit, Inc. (RDDT) by mylizard in December 2024, which highlighted the company’s untapped monetization potential through higher ad density, improved user engagement incentives, stronger bot detection, and a more advertiser-friendly platform. RDDT’s stock price has appreciated by approximately 3.75% since our coverage. ajkomajko shares a similar view but emphasizes Reddit’s earnings outperformance, margin expansion, scalable economics, and AI licensing catalysts as key drivers of future upside.
Reddit, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 70 hedge fund portfolios held RDDT at the end of the first quarter which was 82 in the previous quarter. While we acknowledge the risk and potential of RDDT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RDDT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
