Top Wall Street brokerages, involved in Reddit’s (NYSE:RDDT) public offering, began coverage of the social media giant with reservations about its user growth but optimism about ad revenue and artificial intelligence utilization.
Goldman Sachs (NYSE:GS) and JPMorgan & Chase (NYSE:JPM) initiated coverage with a “neutral” rating and price targets of $40 and $47, respectively, while Morgan Stanley gave an “equal-weight” rating with a $45 price target. Reddit’s shares were trading at $40.66, below its debut price of $47.
JPMorgan analysts, led by Doug Anmuth, expressed concerns about Reddit’s daily active unique users (DAUq) growth, noting its base of 73 million users is relatively sub-scale compared to peers like Meta Platforms’ (NASDAQ:META) Facebook and Elon Musk’s X.
They projected DAUq to reach 109 million users by 2026 but emphasized the need for Reddit to demonstrate meaningful scalability over time.
While Reddit (NYSE:RDDT) heavily relies on advertising revenue, it also emphasizes AI as a growth area. Morgan Stanley, among others, highlighted Reddit’s need to demonstrate outsized user growth and faster execution before justifying its valuation.
Deutsche Bank, Raymond James, Needham, Piper Sandler, and Roth MKM were more optimistic, with Needham setting the highest price target at $55. Piper labeled Reddit an “iconic internet asset,” while Roth regarded it as the “front page of the Internet,” deserving of a premium valuation due to its valuable user-generated content.
JPMorgan praised Reddit’s potential for AI-based ads monetization, citing its unique corpus of user-generated content as a valuable source for large language model training. Raymond James emphasized Reddit’s unique data corpus of authentic human conversation, highlighting its value for data monetization.
Reddit gained prominence during the “meme-stock” saga of 2021, and recent coverage reflects both optimism and caution about its future profitability and growth trajectory.
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