Reddit ($RDDT) - I am loading up on reddit again, here's why | Reddit — r/ValueInvesting Ideas & AI Summary

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Author re-enters a long Reddit ($RDDT) position, arguing its 40% long-term GAAP net income margin potential means it trades near 30x earnings today while AI across content, advertising and feed drives 40-50% growth.

RDDT — LONG The author is loading up on Reddit ($RDDT) again, arguing the company will reach 40% GAAP net income margins long-term; applying that margin to the most recent quarter implies roughly $1B annualized GAAP net income, or about 30x earnings today. The causal mechanism is AI: content algorithms, advertising, ad generation and feed customization all improve with AI, so he reasons that if Meta can guide 30% growth, Reddit can grow 40-50% over the coming year. He previously rode the stock from $100 to $240 before taking profits and expects another 40-50% year as the ceiling has risen, while admitting uncertainty about whether Reddit's DAU is weaker.

I am loading up on reddit again

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OG POST: https://www.reddit.com/r/ValueInvesting/comments/1kv5pnv/i_am_currently_loading_up_on_reddit_rddt_heres_why/

8 months ago, I made a post on why I thought Reddit was cheap. I rode this stock from $100 to $240 before taking profits and exiting. Originally, I thought Reddit was worth $200 a share, but I believe it's now worth much higher. And here's why 

If you go read that original post, the thing I spend most of my time talking about is margins, and just how incredibly exceptional Reddit's margins are. That core thesis still holds true, and the most important thing to understand is that Reddit will reach 40% gaap net income margins long-term. If we apply this margin to their most recent quarter, they're trading at $1B GAAP net income annualized or 30x earnings today. For anyone asking how I know they'll reach these margins, it's because these are what Meta's margins would be if they weren't punting on the metaverse or whatever Zuck is currently interested in. I'm not hating. I actually think Zuck's a great CEO. I'm just saying. 

Now, here's where things get interesting. I strongly suspected that Reddit was seeing these aggressive numbers largely off the back of the benefits of AI. Every part of Reddit stack benefits from AI, and if you don't believe me, please just refer to Meta's guidance for 30% growth in Q1. 

Content is an AI algorithm. Advertising is an AI algorithm. Generating ads? AI. Customizing feed, AI. Software products built by AI. You get the point. Everything is computer. 

The reason why Meta has been growing so aggressively is that every single part of their company benefits so much from AI. Reddit is the same. Reddit might have weaker DAU. I'm not really sure, but the ceiling of Reddit just went much higher. I think they're going to have another 40-50% year. If Meta is having 30%, it's not hard to believe Reddit would do 40%. That's all I'm saying. 

Anyway, just wanted to drop this little piece of alpha on this crazy call off today. Hope everyone has a good day!

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u/ActuallyMy Reddit r/ValueInvesting

Reddit long: 40% margins, AI-driven 40-50% growth

The author is loading up on Reddit ($RDDT) again, arguing the company will reach 40% GAAP net income margins long-term; applying that margin to the most recent quarter implies roughly $1B annualized GAAP net income, or about 30x earnings today. The causal mechanism is AI: content algorithms, advertising, ad generation and feed customization all improve with AI, so he reasons that if Meta can guide 30% growth, Reddit can grow 40-50% over the coming year. He previously rode the stock from $100 to $240 before taking profits and expects another 40-50% year as the ceiling has risen, while admitting uncertainty about whether Reddit's DAU is weaker.

Reddit ($RDDT) - I am loading up on reddit again, here's why

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