Is Reddit Still a Buy After Its 11.6% Surge to $218?
November 25, 20256 min read
Is Reddit Still a Buy After Its 11.6% Surge to $218?
Whether Reddit remains a buy after its sharp rally.
Tendrill
Is Reddit (RDDT) Still a Buy After Ripping 11.6% to $218?
Reddit shares surged 11.6% today to close at $218.48, extending an already powerful multi‑month rally. The move came alongside a sectorwide tech bounce and a burst of speculative enthusiasm after Benzinga highlighted potential chip collaboration between Meta and Google linked to AI infrastructure. But with RDDT now up sharply from last week’s levels, investors are asking the right question: Is Reddit still a buy at $218?
Below is a full breakdown of the fundamentals, valuation markers, growth catalysts, and risks that matter most right now.
Reddit’s Q3 Results Show Breakout Momentum
Reddit’s third quarter confirmed what bullish analysts have been arguing since the IPO: the business is scaling faster than the market expected.
Key results from Q3, as reported by Seeking Alpha (source):
68% revenue growth to $585 million
74% advertising revenue growth, driven by improved targeting and automation
91% gross margin, highlighting platform leverage
Significant improvement in operating cash flow and EPS
This pace of growth is well above that of most social platforms and has supported analysts’ willingness to maintain bullish ratings despite the stock’s steep climb.
Analyst Targets Still Hover Near Current Price — With Select Upside
Across Wall Street, the average price target sits around $221 based on MarketBeat and Public.com aggregated estimates. That implies only marginal upside from today’s $218 close.
But the averages are skewed by cautious holds. Some analysts are notably more optimistic:
Seeking Alpha’s featured analyst places a $250 target, implying roughly 20% upside from current levels.
Reddit’s strong buy classification on SA is supported by its growth rates and operating leverage.
This creates a split dynamic: consensus is nearly tapped out, but high‑conviction analysts still see room for meaningful appreciation.
AI Data Licensing Could Shift Reddit’s Earnings Power
One of the most compelling parts of Reddit’s long‑term story comes from something that was not fully reflected in the IPO valuation: .
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AI data licensing revenue
According to community analysis on r/redditstock (source):
Reddit currently generates roughly $150 million per year from data agreements with Google and OpenAI.
New or expanded contracts could add $250 million in incremental high‑margin revenue within 12–18 months.
These deals operate at 90%–100% net margin because Reddit incurs minimal costs to provide the data.
If this scenario plays out, Reddit’s EPS could expand meaningfully, supporting a valuation well above current levels and providing insulation from advertising cyclicality.
Valuation: High Multiples, But Some Models Say Undervalued
Reddit is not cheap by conventional measures. Its forward P/E multiple is elevated, reflecting aggressive future growth expectations. That’s a risk if growth slows.
However, one prominent valuation model sees the stock differently:
Simply Wall St’s October discounted cash flow analysis calculated fair value at $295 per share, implying Reddit was 27% undervalued (source).
DCF models lean heavily on long-term assumptions, but this estimate underscores that if Reddit maintains even a portion of its current momentum, today’s price does not necessarily mark a peak.
What Drove Today’s Spike?
Today’s 11.6% jump was driven less by fundamentals and more by market sentiment and macro tailwinds:
Benzinga attributed the move to a sectorwide lift from news that Meta may begin using Google’s TPU chips in 2026 — a story tied to broader AI enthusiasm rather than Reddit specifically (source).
The Nasdaq rallied on a post-jobs-data rebound.
High-beta tech and AI names caught bids across the board.
Translation: Reddit moved because momentum traders piled in, not because of fresh company-specific catalysts.
Key Risks to Consider
Even with Reddit’s strong financial performance, real risks remain:
User growth can fluctuate, and declines in U.S. engagement have appeared in prior quarters.
Heavy reliance on advertising means downturns in ad budgets will hit revenue.
Bot activity and moderation challenges continue to pressure the platform’s quality and advertiser trust.
Valuation sensitivity: At +160% YTD, expectations are high — any earnings miss could deflate the premium.
Reddit’s business is improving, but the stock is expensive, and volatility should be expected.
Momentum Play or Long-Term Hold?
Momentum Case:
If market conditions stay favorable and AI‑linked sentiment remains hot, Reddit could continue running toward high-end targets like $250. The stock has strong technical momentum and benefits from sectorwide AI correlations.
Fundamental/Long-Term Case:
The company’s Q3 results, expanding AI licensing revenue, and high-margin operating model support a multi-year growth runway. Reddit is not a value stock, but its combination of accelerating revenue, high gross margins, and potential data monetization gives it genuine upside despite near-term valuation concerns.
Bottom Line:
Reddit is still a buy for investors with a long time horizon and tolerance for volatility. But after a rapid 11.6% surge and with consensus price targets nearly reached, short-term traders should expect choppiness. The next major leg higher likely depends on confirmation of new AI data deals or another earnings beat.