Reddit’s is far undervalued from Fair Value. (Growth company stock talk)

This is a direct response to the "actual math" post by u/[r-d-d-t](https://www.reddit.com/user/r-d-d-t/) here  [https://www.reddit.com/r/ValueInvesting/comments/1qz3twp/correction\_to\_my\_previously\_very\_flawed\_analysis/?utm\_source=share&utm\_medium=web3x&utm\_name=web3xcss&utm\_term=1&utm\_content=share\_button](https://www.reddit.com/r/ValueInvesting/comments/1qz3twp/correction_to_my_previously_very_flawed_analysis/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button) While I respect the effort in your post , Your post is essentially a "floor" valuation rather than a "ceiling" projection. Here is why the math changes when you look at the February 2026 reality. you explicitly keep DAU (Daily Active Users) fixed across all scenarios, which is a significant and arguably conservative assumption that anchors the entire model. Here is a breakdown of the math used in that post versus the actual data we have from the **February 2026** reports. # 1. The DAU Assumption You assume that Reddit’s user growth has effectively peaked, particularly in the U.S.. * The Post Number: Fixed at 121.4 million total DAU for all scenarios (Bear, Base, Bull). * The Reality Check: In the most recent Q4 2025 report, Reddit reached 121.4 million DAU, but this represented +19% to +21% YoY growth. Assuming that a company growing users at \~20% annually will suddenly drop to 0% growth for the next five years is a highly conservative "bearish" baseline, even for a "Reasonable" case. * Missed Opportunity: By fixing DAU, the post ignores Reddit's ability to convert its logged-out users (estimated at over 500 million) or its MAUs into logged-in DAUs, a key part of management's 2026 strategy. * Reddit’s International growth is the key driver. While U.S. growth may eventually slow, international revenue grew 78% YoY in Q4. Even if the U.S. market saturates, the global market is wide open. This makes a "Fixed DAU" model mathematically obsolete for 2026-2030. # 2. The ARPU-Centric Model Since users are fixed, Your price targets are driven almost entirely by ARPU (Average Revenue Per User) as a percentage of META's estimated 2025 ARPU. * Bear Case ($96.09): Assumes Reddit only reaches 20% of Meta’s ARPU. * Reasonable Case ($183.88): Assumes Reddit reaches 33% of Meta’s ARPU. * Ultra Bull Case ($638.22): Assumes Reddit reaches 100% of Meta’s ARPU (which the post admits is "very very unlikely"). # 3. What the Post Misses Based on the data we've discussed from the latest earnings here in RDDT sub [https://www.reddit.com/r/redditstock/s/W2exDScibH](https://www.reddit.com/r/redditstock/s/W2exDScibH), there are three major areas where the post's "math" may be underestimating the stock: * Revenue Growth Divergence: The post assumes a 18% CAGR for the "Reasonable" case. However, Reddit just reported +70% YoY revenue growth. While growth will naturally slow, an 18% assumption ignores the current acceleration fueled by AI data licensing and a 78% surge in international revenue. * The Margin Discrepancy: The poster uses a 30% net profit margin for all cases. While this is a fair "mature company" estimate, it overlooks the 91.9% gross margins Reddit is currently operating at, which provides significant "operating leverage", meaning profits can grow much faster than revenue as the business scales. gross margin determines how fast profits *can* grow. A 30% net margin on 92% gross margin revenue is much easier to achieve than on a 40% gross margin business. This is why the poster's "Reasonable" case is likely too low. * Share Count & Buybacks: The post assumes 2% annual share dilution through 2030 (reaching 227M shares). It does not factor in the $1 billion share buyback program that was just authorized, which is specifically designed to offset dilution and reduce the share count. the $1B buyback isn't just a "Catalyst", it is an active defense against the 2% dilution the other poster mentioned. # 4. Updated Share Price Scenarios following your original categorization (End of 2026) |**Scenario**|**Est. Share Price**|The Logic|**Valuation Assumptions**| |:-|:-|:-|:-| || |Bear Case|$115 - $125|"The Ad Recession" Growth slows drastically to 30%. AI data deals stall. Wall Street treats it like Snap/Pinterest.|8x Sales (Typical Social Media Multiple)| |Reasonable|$190 - $210|"Consensus Reality" Growth tapers naturally to \~45-50%. Margins expand. The $1B buyback puts a floor under the price.|12x Sales (Current Forward Valuation)| |Optimistic|$260 - $280|"Global Expansion Works" Growth stays hot at \~60%. International ARPU doubles. The market awards a "Premium" multiple.|15x Sales (High-Growth SaaS Multiple)| |Ultra Bull|**$380 - $420**|"The Data Utility" Growth accelerates to 75%+ driven by massive AI licensing deals. Reddit is repriced as an "AI Infrastructure" play like Palantir.|20x Sales (Nvidia/Palantir Multiple)| The "Reasonable" target of $190 - $210 is actually quite conservative. It assumes the valuation multiple stays exactly where it is today (\~12x Forward Sales) and simply follows the revenue growth. If Reddit executes perfectly and enters the "Ultra Bull" territory (getting the Palantir valuation treatment), the stock could realistically double from here.