Reddit Stock To $298?
Reddit (RDDT) stock has fallen 9.4% during the past day, and is currently trading at $228.75. Our multi-factor assessment suggests that it may be time to buy more shares of RDDT stock. We have, overall, a positive view of the stock, and a price of $298 may not be out of reach. We believe there is nothing to fear in RDDT stock given its overall Very Strong operating performance and financial condition. Hence, despite its Very High valuation, the stock appears Attractive but Volatile.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Very High |
| What you get: | |
| Growth | Very Strong |
| Profitability | Moderate |
| Financial Stability | Very Strong |
| Downturn Resilience | N/A |
| Operating Performance | Very Strong |
| Stock Opinion | Attractive but Volatile |
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Let’s get into details of each of the assessed factors but before that, for quick background: With $43 Bil in market cap, Reddit offers a global platform for authentic conversations, learning, exploring passions, exchanging goods, creating communities, and fostering belonging among diverse users worldwide.
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[1] Valuation Looks Very High
| RDDT | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 22.7 | 3.3 |
| Price-to-Earnings Ratio | 123.6 | 24.2 |
| Price-to-Free Cash Flow Ratio | 84.7 | 21.6 |
This table highlights how RDDT is valued vs broader market. For more details see: RDDT Valuation Ratios
[2] Growth Is Very Strong
- Reddit has seen its top line grow at an average rate of 45.3% over the last 3 years
- Its revenues have grown 70% from $1.1 Bil to $1.9 Bil in the last 12 months
- Also, its quarterly revenues grew 67.9% to $585 Mil in the most recent quarter from $348 Mil a year ago.
| RDDT | S&P 500 | |
|---|---|---|
| 3-Year Average | 45.3% | 5.6% |
| Latest Twelve Months* | 69.7% | 6.3% |
| Most Recent Quarter (YoY)* | 67.9% | 7.3% |
This table highlights how RDDT is growing vs broader market. For more details see: RDDT Revenue Comparison
[3] Profitability Appears Moderate
- RDDT last 12 month operating income was $263 Mil representing operating margin of 13.8%
- With cash flow margin of 27.0%, it generated nearly $514 Mil in operating cash flow over this period
- For the same period, RDDT generated nearly $349 Mil in net income, suggesting net margin of about 18.3%
| RDDT | S&P 500 | |
|---|---|---|
| Current Operating Margin | 13.8% | 18.8% |
| Current OCF Margin | 27.0% | 20.5% |
| Current Net Income Margin | 18.3% | 13.0% |
This table highlights how RDDT profitability vs broader market. For more details see: RDDT Operating Income Comparison
[4] Financial Stability Looks Very Strong
- RDDT Debt was $25 Mil at the end of the most recent quarter, while its current Market Cap is $43 Bil. This implies Debt-to-Equity Ratio of 0.06%
- RDDT Cash (including cash equivalents) makes up $2.2 Bil of $2.9 Bil in total Assets. This yields a Cash-to-Assets Ratio of 77.4%
| RDDT | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 0.1% | 19.9% |
| Current Cash-to-Assets Ratio | 77.4% | 7.2% |
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