When Reddit (RDDT) rose from below $50 earlier this year to as high as $158.49, selling pressure mounted last week. The stock fell because a key stakeholder filed to establish a credit facility. The investor will back this with its holding in RDDT stock.
Advance Magazine Publishers intends to sell 10 million of its restricted stock on Reddit. Despite the sale involving a conversion from Class B to Class A, investors sold RDDT stock, too.
Reddit trades at a steep premium. Its non-GAAP is 75.5 times, nearly 460% higher than the sector median.
Catalysts
Reddit’s growth drivers include vertical diversification. The firm will expand in media entertainment, pharmaceutical, and tech finance. By strengthening its client relationships, it will attract new lines of business. This expands its customer base.
In EMEA, Reddit is developing its channels to attract large customers. As a result, it continues to add new advertisers. Shareholders should expect Reddit’s total addressable market to increase.
The company is increasing its revenue diversification among the user base. This starts with Reddit encouraging its users to spend more time on the platform. When this happens, the average revenue per user will increase.
Your Takeaway
Reddit has the potential to reach a market size above that of Snapchat (SNAP) and approach that of Meta Platforms (META). To get there, Reddit needs to first achieve steady growth in its daily active users.
