Key Takeaways
D.A. Davidson initiated coverage of Reddit Inc. (RDDT) with a Buy rating and a $200 price target, calling the stock’s recent pullback a “compelling opportunity” for investors to gain exposure to the social media platform’s unique data assets.
"We believe that Reddit remains incredibly under-monetized relative to peers and has positioned itself as a human-first social platform that will continue to attract more users and advertisers as it scales," D.A. Davidson analyst Wyatt Swanson said in a note Tuesday.
The new $200 price target implies a 19.1 percent upside from Reddit’s premarket price of $167.91. The call comes after a rough start to the year for the company, with shares down 28 percent year-to-date and more than 40 percent below a record high of $282.95 set late last year, according to IBD MarketSurge data.
Swanson argued that investor fears over slowing user growth and Reddit’s negotiating leverage with large language model (LLM) developers are overblown. The analyst sees a structural advantage in Reddit’s text-based, community-focused content, which serves as a valuable data source for AI companies like Google and OpenAI. Reddit's current data licensing contracts are up for renewal in early- to mid-2027, and Swanson’s base case assumes renewal rates 15 to 30 percent higher.
A key part of the bull thesis rests on closing the monetization gap with rivals. Analysis from NAI500 shows Reddit’s advertising revenue per user is approximately $17, substantially below the roughly $60 generated by Meta Platforms Inc. The recent launch of Max Campaigns, an AI-powered advertising tool, is expected to help close this gap by simplifying ad buying.
Further upside could come from legal action. Reddit is currently suing AI startup Anthropic for allegedly scraping its content without a licensing agreement. Swanson sees a settlement as the most likely outcome before Anthropic’s expected public debut later in 2026, which could provide a boost to revenue and EBITDA estimates.
The bullish initiation provides a counterpoint to recent negative sentiment. Despite the year-to-date drop, Reddit stock has shown recent momentum, gaining over 20 percent in April and climbing back above its 50-day exponential moving average for the first time since January.
The analyst move suggests growing confidence in Reddit's ability to leverage its vast user-generated content for both advertising and AI data licensing. Investors will watch the company's first-quarter results on April 30 for signs of user growth and revenue beats that could validate the optimistic outlook.
This article is for informational purposes only and does not constitute investment advice.
