Reddit shares have declined more than 25% over the past six months amid AI disruption fears, but an analysis suggests the stock is undervalued at current levels. The company reported first-quarter 2026 revenue growth of nearly 69% year-over-year, a gross margin of 91.4%, and positive earnings per share of 3.74, while its balance sheet shows almost no debt and cash 130 times higher than liabilities. A discounted cash flow model using a 50% five-year revenue growth rate and a 70% profit margin assumption yields a fair value of $213 per share, implying 22% upside from recent prices. The analysis argues that Reddit's authentic human conversations and valuable data for AI training provide a competitive moat, and that Google algorithm changes have not yet impacted daily active user growth, which rose 17% in the most recent quarter.
Reddit, Inc.Analyst says stock is undervalued with DCF fair value $213, implying 22% upside.