u/run_midnight

Reddit's primary revenue (90%+) is from ads, growing 75% YoY in Q4 2025, with a forecasted 40%+ growth rate. Analysts project high profitability (40%+ EBITDA margins) and have price targets up to $320. The market is undervaluing RDDT's scalable ad business and the impact of its $1B share repurchase plan. Applying a 40% growth rate to net income and the buyback suggests significant upside. Strong ad growth, analyst confidence, and capital return via buybacks support a long position with the potential for the stock to double. Ad growth slows below 40%; AI data licensing revenue (a minor but highlighted segment) declines as predicted; high PE multiple (62) contracts if growth disappoints.

Author’s model projects Meta Q2 2026 revenue at ~$59.7B, EPS $7.10, and full‑year EPS trending down but still high; historical P/E expansion to 30x yields price targets of $825 (Q2) and ~$1,000 (late 2026). Current share price (~$611) offers a discount to even the 20x P/E target (~$550), and the author expects strong ad revenue growth and Reality Labs capex to eventually pay off, creating a buying opportunity ahead of earnings catalysts. Buy shares and sell short puts (e.g., Jun 12 585P) to accumulate at lower cost; the author is already positioned and plans to “load up on the way down.” Revenue growth may miss if ad market slows or Reality Labs losses widen; expenses (CapEx) could exceed guidance; P/E compression if the broader market re-rates growth stocks lower; the “trade sideways for years” comment highlights potential stagnation.

Author’s model projects Q4 2026 EPS of $0.5485, implying potential price of $270.92 at 150x PE (current PE ~225). Short put strategy (selling $125 puts) suggests author believes downside is limited and stock will trade above $125 by June 2026, using premium to accumulate RDDT. Author sees upside potential from continued strong commercial revenue growth (guidance: >115% US commercial growth) but acknowledges high multiples could compress. Revenue misses, PE multiple contraction (could fall to $54), or loss of government contracts. Comments note need for $8B revenue to sustain high multiples.

Revenue growth is slowing (3.45% per quarter) while expenses (especially cost of revenue, sales, admin) are accelerating (5.83%+), compressing margins and EPS in H2 2026. Earnings momentum fades, and a 30x P/E on declining trailing EPS yields a price target of $97–108, far below current trading. Netflix’s fundamental trajectory points to a significant share price correction by year‑end 2026. Continued tax rebates, lower content costs, or subscriber surprises could sustain margins; the author’s own bullish “short puts” position contradicts the thesis.