Core Insights - Reddit (RDDT) shares are trading at a premium with a forward 12-month Price/Sales (P/S) ratio of 12.97X, significantly higher than the Zacks Computer and Technology sector's 6.75X and the Zacks Internet - Software industry's 4.95X [1][8] - The company has seen a 19.1% increase in shares year-to-date, although this is below the broader Zacks Computer & Technology sector's rise of 24.2% [5] - Reddit's advertising revenue surged 74% year-over-year to $549 million, driven by a 75% increase in active advertisers [8][12] Financial Performance - RDDT's shares have outperformed peers like Pinterest (PINS), Meta Platforms (META), and Snap (SNAP), which have forward 12-month P/S ratios of 3.88X, 6.88X, and 2.13X respectively [2][8] - The company reported 116 million daily active users and 444 million weekly active users, both up 20% year-over-year [11] - Average Revenue Per User (ARPU) grew 41% year-over-year to $5.04, indicating effective monetization strategies [11] User Engagement and Growth Strategies - Reddit's expanding portfolio, including unique ad solutions like Dynamic Product Ads (DPA), has driven advertiser adoption and performance [12] - International growth is a focus, with ARPU rising 39% year-over-year to $1.84 in international markets [13] - The introduction of Reddit Answers has increased user engagement, with over 75 million weekly searches on the platform [14] AI and Technological Advancements - The company has invested in AI-powered tools to enhance user experience and community moderation, launching Reddit Pro tools for publishers [17][18] - These tools aim to improve content sharing and engagement for Reddit's 110 million daily active users [18] Future Outlook - For Q4 2025, Reddit expects revenues between $655 million and $665 million, with a Zacks Consensus Estimate of $668.07 million, reflecting a year-over-year growth of 56.20% [19] - The consensus earnings estimate is pegged at 98 cents per share, indicating a year-over-year growth of 172.22% [20] - The company's strong advertising business and improved user experience justify its premium valuation, supported by a Zacks Rank 1 (Strong Buy) and a Growth Score of A [21]
RDDT 12.97X P/S Suggests Premium Valuation: Should You Buy the Stock?