We came across a bullish thesis on Reddit, Inc. (RDDT) on wallstreetbets Subreddit Page by mylizard. In this article, we will summarize the bulls’ thesis on RDDT. Reddit, Inc. (RDDT)’s share was trading at $167.17 as of Dec 9th. RDDT’s forward P/E was 188.68 according to Yahoo Finance.
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Reddit, with its $30 billion market cap, has significant untapped profit potential but continues to underperform due to poor monetization strategies and overlooked user experience improvements. The removal of its diverse award system, previously a driver of Reddit Gold sales and a motivator for high-quality content creation, has diminished engagement. This sterilized approach not only reduces revenue but also weakens incentives for users to contribute valuable posts, hindering the platform’s organic growth.
Compounding these issues is Reddit’s rampant bot and repost problem, which remains largely unaddressed despite the availability of user-created solutions. With API restrictions limiting external tools, Reddit has an opportunity to implement its own efficient detection systems. A robust program to flag bots and reposts wouldn’t require significant investment but would greatly enhance the site’s content authenticity and user satisfaction.
Advertising represents Reddit’s most glaring missed opportunity. While the platform currently limits ads to an infrequent presence—roughly one ad every 30 posts and a rare placement above the comments—other social platforms like Instagram are inundated with ads, often to the point of overshadowing actual content. Reddit could significantly increase its ad density without meaningfully degrading user experience, thereby unlocking substantial revenue. Furthermore, the platform’s lax content moderation policies, which allow extreme subreddits to persist, deter potential advertisers. By taking a balanced approach to content curation, Reddit could attract a broader range of advertisers while maintaining its distinctive community-driven ethos.
In summary, Reddit’s current profitability underscores its strong foundation, but its untapped potential is enormous. By reinstating user engagement incentives, addressing bot and content authenticity issues, optimizing ad placements, and refining its advertiser-friendly image, Reddit could dramatically increase revenue, aligning its valuation with its true earning power. The platform’s evolution depends on decisive action to capitalize on these opportunities.
Reddit, Inc. (RDDT) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held RDDT at the end of the third quarter which was 39 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 timeframe. If you are looking for an AI stock that is more promising than RDDT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.