{ "@context": "https://frontierpicks.com/schemas/dossier.v1.json", "ticker": "RDDT", "name": "Reddit, Inc.", "url": "https://frontierpicks.com/dossiers/RDDT/", "json_url": "https://frontierpicks.com/dossiers/RDDT.json", "status": "WATCHLIST", "current_conviction": "LOW", "archetype": { "code": "a4", "n": 4 }, "current_thesis": "Reddit, Inc. shares are more likely to lag the S&P 500: falling search traffic threatens its daily user count despite 53% revenue growth. The February 2027 fourth-quarter report settles it.", "invalidation_trigger": "A daily close above $125, DA Davidson's post-report target, which would show the shares recovering rather than lagging; or fourth-quarter DAUq at or above the third quarter's 130.3 million, with revenue above the $1.03 billion top of the guide.", "catalyst_date": null, "portfolio": null, "pick": null, "themes": [ "adtech-digital-advertising" ], "tags": [], "sources": [], "notes": [ "Reddit has a dual-class share structure: Class B shares carry extra votes, so public Class A holders have limited voting control.", "Many executive share sales are made under Rule 10b5-1 plans, which schedule trades in advance; Form 4 filings state when a sale falls under such a plan." ], "source_links": [ { "title": "Reddit, Inc. - Form 8-K - FY2026", "url": "https://www.sec.gov/Archives/edgar/data/0001713445/000171344526000114/earningspressreleaseq326.htm", "date": null }, { "title": "Reddit Sinks 25% as Search Traffic Falls “Down Meaningfully” and Q4 Guidance Disappoints", "url": "https://finance.yahoo.com/markets/stocks/articles/reddit-sinks-25-search-traffic-135832297.html", "date": null }, { "title": "Reddit Tumbles 23% Premarket to Fall Below $100, Down Over 60% From 52-Week High as Search Traffic Crisis Deepens", "url": "https://www.tradingkey.com/analysis/stocks/us-stocks/262260854-reddit-stock-plunges-23-premarket-falls-below-100-search-traffic-crisis-tradingkey", "date": "2026-10-30" }, { "title": "Reddit Warns Search Traffic Decline Could Pressure Fourth-Quarter User Growth", "url": "https://www.benzinga.com/trading-ideas/movers/26/10/62733868/reddit-warns-search-traffic-decline-could-pressure-fourth-quarter-user-growth", "date": null }, { "title": "Reddit, Inc. - Form 10-Q - FY2026", "url": "https://www.sec.gov/Archives/edgar/data/0001713445/000171344526000116/rddt-20260930.htm", "date": null } ], "evidence": [ { "claim": "Third-quarter 2026 revenue was $895 million, up 53% year over year; advertising revenue was $847 million, up 54%.", "source": "Reddit Q3 2026 results, 8-K filed 2026-10-29", "as_of": "2026-09-30" }, { "claim": "Third-quarter adjusted EBITDA was $402 million (44.9% margin); net income was $283 million; free cash flow was $363 million.", "source": "Reddit Q3 2026 results, 8-K filed 2026-10-29", "as_of": "2026-09-30" }, { "claim": "Global DAUq was 130.3 million, up 12%; U.S. DAUq was 50.7 million, down 2%; logged-out U.S. DAUq fell 4% to 27.3 million.", "source": "Reddit Q3 2026 results, 8-K filed 2026-10-29", "as_of": "2026-09-30" }, { "claim": "Fourth-quarter 2026 guidance: revenue of $1.00 billion to $1.03 billion and adjusted EBITDA of $480 million to $510 million.", "source": "Reddit Q3 2026 results, 8-K filed 2026-10-29", "as_of": "2026-10-29" }, { "claim": "CEO Steve Huffman said search referrals fell by more than 1 million per week on average in October and that DAUq could fall by a low-double-digit percentage in the fourth quarter.", "source": "Q3 2026 shareholder letter and earnings call, reported by Yahoo Finance", "as_of": "2026-10-30" }, { "claim": "Reddit repurchased about 670,000 Class A shares for $100 million in the third quarter at an average price of $149.81.", "source": "Reddit Q3 2026 results, 8-K filed 2026-10-29", "as_of": "2026-09-30" }, { "claim": "Director Mary Porter Gale sold 6,000 shares at an average of $98.00 on 2026-11-03 to 2026-11-04 and 4,000 shares at $96.00 on 2026-11-06 in open-market sales.", "source": "SEC Form 4 filings dated 2026-11-05 and 2026-11-10", "as_of": "2026-11-06" }, { "claim": "Evercore ISI downgraded Reddit to In-Line with a $120 target; Citi cut its target to $186 from $245 and kept a Buy rating.", "source": "Benzinga and Fiscal.ai analyst notes", "as_of": "2026-11-02" } ], "view_changes": [], "frame": null, "filed_numbers": { "as_of": "2026-11-13", "sector": "Technology", "financials": { "status": "ok", "reason": null, "close_date": "2026-11-13", "latest_quarter": "2026-09-30", "figures": { "revenue": { "status": "ok", "quarters": [ { "end": "2026-09-30", "filed": "2026-10-30", "value_musd": 895, "yoy_pct": 53 }, { "end": "2026-06-30", "filed": "2026-07-31", "value_musd": 804.9, "yoy_pct": 61.1 }, { "end": "2026-03-31", "filed": "2026-05-01", "value_musd": 663.4, "yoy_pct": 69.1 }, { "end": "2025-12-31", "filed": "2026-02-06", "value_musd": 725.6, "yoy_pct": 69.7 }, { "end": "2025-09-30", "filed": "2026-10-30", "value_musd": 584.9, "yoy_pct": 67.9 }, { "end": "2025-06-30", "filed": "2026-07-31", "value_musd": 499.6, "yoy_pct": 77.7 } ] }, "gross_margin": { "status": "ok", "quarters": [ { "end": "2026-09-30", "filed": "2026-10-30", "pct": 91.5 }, { "end": "2026-06-30", "filed": "2026-07-31", "pct": 91.3 }, { "end": "2026-03-31", "filed": "2026-05-01", "pct": 91.5 }, { "end": "2025-12-31", "filed": "2026-02-06", "pct": 91.9 }, { "end": "2025-09-30", "filed": "2026-10-30", "pct": 91 }, { "end": "2025-06-30", "filed": "2026-07-31", "pct": 90.8 } ] }, "operating_margin": { "status": "ok", "quarters": [ { "end": "2026-09-30", "filed": "2026-10-30", "pct": 29.2 }, { "end": "2026-06-30", "filed": "2026-07-31", "pct": 28.8 }, { "end": "2026-03-31", "filed": "2026-05-01", "pct": 27.6 }, { "end": "2025-12-31", "filed": "2026-02-06", "pct": 31.9 }, { "end": "2025-09-30", "filed": "2026-10-30", "pct": 23.7 }, { "end": "2025-06-30", "filed": "2026-07-31", "pct": 13.6 } ] }, "pretax_income": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "value_musd": 289 }, "net_income": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "four_quarters_end": "2026-09-30", "value_musd": 283.3, "four_quarters_musd": 991.7 }, "operating_cash_flow": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "first_end": "2025-12-31", "value_musd": 1204.7 }, "capital_spending": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "first_end": "2025-12-31", "value_musd": 6.6 }, "free_cash_flow": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "first_end": "2025-12-31", "value_musd": 1198.1 }, "diluted_share_change": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "base_end": "2025-09-30", "pct": -0.4 }, "cash": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "value_musd": 3033.4 }, "debt": { "status": "none reported" }, "net_cash": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "value_musd": 3033.4, "note": "no debt reported" }, "deferred_revenue": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "value_musd": 38.8, "yoy_pct": 90.2 }, "backlog": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "value_musd": 62.4, "yoy_pct": -64 }, "receivables": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "value_musd": 730.1 }, "inventory": { "status": "not reported" }, "equity": { "status": "ok", "end": "2026-09-30", "filed": "2026-10-30", "value_musd": 3581.7 }, "market_value": { "status": "ok", "close_date": "2026-11-13", "basis_end": "2026-09-30", "basis_filed": "2026-10-30", "value_musd": 19873.1 }, "enterprise_value": { "status": "ok", "close_date": "2026-11-13", "basis_end": "2026-09-30", "basis_filed": "2026-10-30", "value_musd": 16839.7, "note": "no debt reported" }, "ev_sales": { "status": "ok", "close_date": "2026-11-13", "basis_end": "2026-09-30", "basis_filed": "2026-10-30", "multiple": 5.5, "note": "no debt reported" }, "ev_ebit": { "status": "ok", "close_date": "2026-11-13", "basis_end": "2026-09-30", "basis_filed": "2026-10-30", "multiple": 18.5, "note": "no debt reported" }, "pe": { "status": "ok", "close_date": "2026-11-13", "basis_end": "2026-09-30", "basis_filed": "2026-10-30", "multiple": 20 }, "pb": { "status": "ok", "close_date": "2026-11-13", "basis_end": "2026-09-30", "basis_filed": "2026-10-30", "multiple": 5.5 }, "fcf_yield": { "status": "ok", "close_date": "2026-11-13", "basis_end": "2026-09-30", "basis_filed": "2026-10-30", "pct": 6 } } }, "short_interest": { "status": "ok", "settlement": "2026-10-15", "published": "2026-11-13", "short_pct_of_outstanding": 10.7, "days_to_cover": 5.1, "change_pct": -2.3 }, "insiders": { "status": "ok", "as_of": "2026-11-14", "windows": [ { "days": 90, "status": "ok", "from": "2026-08-17", "bought_usd": 0, "sold_usd": 31251900.94, "bought_unpriced": 0, "sold_unpriced": 0 }, { "days": 365, "status": "ok", "from": "2025-11-15", "bought_usd": 8870869.32, "sold_usd": 239460895.5, "bought_unpriced": 0, "sold_unpriced": 0 } ] } }, "body_markdown": "## Current Thesis\nReddit, Inc. shares are more likely to lag the S&P 500 over the next three months. Search referral traffic is falling faster than the advertising business can offset, and management has warned that daily users could shrink in the fourth quarter. The fourth-quarter report, expected in early February 2027, settles it. It will show whether daily active uniques (DAUq, Reddit's count of distinct daily visitors) fall by the low-double-digit percentage management flagged, and whether revenue lands inside the $1.00 billion to $1.03 billion guide.\n\nThe rating is Low. Third-quarter profits were strong, but the user count that drives the multiple is turning down. Since the report, six brokers have cut their price targets and three have downgraded the stock. A director sold shares on the open market in early November.\n\nAt the $105.66 close on 2026-11-11, the shares sat 59.9% below the $263.50 intraday high of 2026-01-09. The price already assumes some user loss. It does not yet show how large that loss will be, and the February report measures it.\n\n## Bull Case\n- **Revenue and profit are still accelerating.** Third-quarter revenue rose 53% year over year to $895 million, above the company's own $860 million to $870 million outlook. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) was $402 million, a 44.9% margin (company 8-K, 2026-10-29).\n- **Advertisers pay more for each user.** Global average revenue per user rose 36% to $6.87 in the third quarter, and U.S. revenue per user rose 53% to $13.82 (company 8-K, 2026-10-29).\n- **Cash generation funds buybacks.** Free cash flow was $363 million in the third quarter, up 98%. Reddit repurchased about 670,000 Class A shares for $100 million at an average of $149.81, bringing 2026 buybacks through September to about $340 million (company 8-K, 2026-10-29).\n- **Logged-in users carry the revenue.** Management says logged-in and app users generate more than 80% of commercial revenue (TradingKey, 2026-10-30). That cushions revenue against a loss of casual search visitors.\n- **New ad and product formats are shipping.** On 2026-11-03 Reddit began testing contextual ads on search pages based on the query (Benzinga). On 2026-11-10 it launched Reddit Reviews in the U.S., with expansion abroad planned for 2027 (Benzinga).\n\n## Bear Case\n- **Search referrals are falling faster.** The third-quarter shareholder letter said search referral traffic was \"down meaningfully,\" with the decline accelerating late in the quarter. CEO Steve Huffman said referrals fell by more than 1 million per week on average in October (Yahoo Finance, 2026-10-30).\n- **Management has warned users may shrink.** Huffman said DAUq could fall by a low-double-digit percentage from about 130 million in the fourth quarter if the trend continues. U.S. DAUq already fell 2% year over year to 50.7 million in the third quarter (company 8-K, 2026-10-29).\n- **Guidance came in below estimates.** The fourth-quarter revenue guide of $1.00 billion to $1.03 billion has a midpoint below the roughly $1.05 billion Wall Street expected (Yahoo Finance and TradingKey, 2026-10-30).\n- **The logged-in shift trades reach for engagement.** On 2026-11-05 Huffman announced a move to a logged-in-only experience (Fiscal.ai). Logged-out DAUq was 76.8 million of the 130.3 million total in the third quarter (company 8-K). Requiring a login risks losing more of those visitors.\n- **Analysts are cutting targets and ratings.** Evercore ISI downgraded the stock to In-Line with a $120 target on 2026-11-02. KeyBanc and Citizens also downgraded after the report (TradingKey, 2026-10-30). Citi cut its target to $186 from $245, JPMorgan to $150, DA Davidson to $125, Guggenheim to $140 and Argus to $150 (Benzinga and Fiscal.ai, 2026-10-30 to 2026-11-12).\n- **A director sold near the lows.** SEC Form 4 filings show director Mary Porter Gale sold 6,000 shares at an average of $98.00 on 2026-11-03 and 2026-11-04, and 4,000 shares at $96.00 on 2026-11-06. Earlier sales by the CEO (17,308 shares at an average of $158.57 on 2026-10-13) and by COO Jennifer Wong (60,000 shares at an average of $150.55 on 2026-10-14) were made under Rule 10b5-1 plans, which schedule trades in advance.\n\n## Setup & Price Structure\nThe shares closed at $105.66 on 2026-11-11, down 33.2% from the $158.12 close of 2026-08-13. The 52-week closing low is $90.97, set on 2026-11-02 after the report-driven sell-off. Since then the shares have recovered unevenly, closing at $93.81 on 2026-11-05, $100.79 on 2026-11-09, $98.67 on 2026-11-10 and $105.66 on 2026-11-11.\n\nThe shares trade far below both trend lines. As of 2026-11-11 the 50-day moving average is $141.57 and the 200-day moving average is $154.59, with the 50-day under the 200-day. A return to the 50-day average would require a rally of more than a third from the 2026-11-11 close. Analyst targets issued since the report range from DA Davidson's $125 and Evercore ISI's $120 up to Citi's $186.\n\n## Catalyst Calendar\n\n- **~2027-02-05 (est.):** Fourth-quarter 2026 results and 2027 first-quarter outlook. Shows whether DAUq fell by the low-double-digit percentage management warned of and whether revenue landed inside the $1.00 billion to $1.03 billion guide.\n- **~2026-12-15 (est.):** Results of the logged-in-centric test in select international markets. Shows whether requiring a login keeps visitors who arrive from search or loses them; logged-out users were 76.8 million of 130.3 million DAUq in the third quarter.\n\n## What Would Change Our Mind\n\nA daily close above $125, DA Davidson's post-report target, which would show the shares recovering rather than lagging; or fourth-quarter DAUq at or above the third quarter's 130.3 million, with revenue above the $1.03 billion top of the guide.\n\n## Correlation Notes\nReddit's traffic comes partly from Google search, so the shares trade on news about AI-generated search answers that reduce clicks to outside sites. Reddit has content-licensing agreements with both Google and OpenAI (Yahoo Finance, 2026-10-30). The post-report fall came in the same session window as a broad technology sell-off. Benzinga reported on 2026-10-30 that Alphabet had its worst week since 2011, and on 2026-11-01 that two days of selling erased more than $600 billion of technology market value. Swings in large-cap technology and digital-advertising stocks therefore add to Reddit's own news.", "first_seen": "2026-11-12", "last_analyzed": "2026-11-12T18:12:34+00:00", "last_synthesized": "2026-11-12", "date_modified": "2026-11-12", "license": "Content © FrontierPicks. Cite the canonical URL." }