QS Research · Michael Burry's Scion Capital analyst template · 2006
Reddit, Inc. (RDDT)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case none · downside -20% · upside +28%
The market is pricing Reddit as if the search-referral funnel is going away: at $95.10 the stock is 5.23x TTM EV/Sales, 17.5x TTM EV/EBITDA, 19.4x TTM P/E and a 6.2% FCF yield on $3.09B TTM revenue, $991.7M TTM net income and $1.20B TTM free cash flow, against $3.03B of cash and short-term investments with no debt tagged (N7, N10, N11, N14, N15, N18, N19, N20, N23, N24). That is roughly META's multiple (6.46x EV/Sales, 20.7x P/E) for a business that just grew Q3 2026 revenue 53% to $895.0M, earned $283.3M of net income and guided Q4 2026 to $1,000-1,030M of revenue and $480-510M of Adjusted EBITDA (S31, S94). But the base case must be priced at today's own 5.23x, and at 5.23x today's $3.09B of revenue is today's $95.10 - the 30% return a long requires has to come from a re-rating toward GOOGL's 7.14x or from the traffic fear proving temporary, and the Q3 2026 disclosures (U.S. DAUq -2% YoY and -5% QoQ, global DAUq flat QoQ, search-referral and AI-agent warnings, a logged-in-only test still ahead) say 'not yet' (S29, S30, S94). With -19.8% downside, 0.0% base and +28.5% upside the rule does not clear a long, so this is a watch: the mispricing may be forming, and the company's own buybacks at $149.81 and $157.57 say management thinks the same, but the catalyst that proves it has not printed yet (S31, S5).
Key numbers
- Share price: $95.10
- Market cap: $19.20B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $3.09B
- EV / EBITDA (TTM): 17.5x
- P/E (TTM): 19.4x
- Price / book: 5.36x
The 15 boxes
- ✓ 1. Long-form business notes
Reddit is an advertising business built on user-generated communities, with a second, largely unquantified monetization stream in content licensing; the FY2025 10-K describes contextual/interest-based ads sold on first-party signals and 'strategically explore[d]' licensing deals, but the sources give no revenue split between the two. Revenue grew from $666.7M (FY2022) to $804.0M (FY2023), $1.30B (FY2024) and $2.20B (FY2025), and operating income swung from -$560.6M in FY2024 to +$442.0M in FY2025, with operating cash flow of $690.9M against $6.7M of capex. Users grew from 101.7M average DAUq in Q4 2024 to 121.4M in Q4 2025, and between the two annual reports the story shifted from a 'user economy' framing to AI-era products (Reddit Answers search, Reddit Community Intelligence, Max campaigns) plus machine translation across 35 languages.
- ✓ 2. Competitive advantage
Reddit's sources show an asserted brand/community asset, but they do not establish a durable moat: the 10-K describes intense competition for time and ad spend against larger platforms and LLMs. Financial history shows scale and a sharp FY2025 turn to operating profit and cash generation, but also prior operating losses, a FY2024 net loss, and an accumulated deficit. On these sources, the advantage is management-asserted brand/community, not a proven cost, licence, or switching-cost moat.
- ✓ 3. 10-Q takeaways
Q3 2026, quarter ended September 30, 2026, showed revenue of $895.0 million, up 53% year over year, gross margin of 91.5%, net income of $283.3 million, Adjusted EBITDA of $402.3 million, and Free Cash Flow of $362.6 million. DAUq was 130.3 million, up 12% year over year, but U.S. DAUq fell 2% year over year and global DAUq was flat quarter over quarter. Q4 2026 guidance from the October 29, 2026 earnings release is revenue of $1,000 million to $1,030 million and Adjusted EBITDA of $480 million to $510 million. The 10-Q shows $3.0 billion of cash, cash equivalents, and marketable securities as of September 30, 2026, $100 million of Q3 2026 buybacks, and risk disclosures centered on search-referral volatility and AI competition.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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