RDDT
Reddit, Inc.
$141.67
High-Growth Software
80%
Revenue × Terminal Margin DCF
Moderate
·
Conviction
Fair Value
Trading 17.4% below fair value
You pay
$141.67
Bear
$82.24
Fair
$171.52
Bull
$241.13
Bear
$82.24
-42.0%
18% rev growth, 22% terminal margin
Fair
$171.52
+21.1%
30% rev growth, 30% terminal margin
Bull
$241.13
+70.2%
35% rev growth, 34% terminal margin
Key Value Driver
Revenue growth (30%) × margin expansion to 30%
Terminal Value % of EV
58%
Implied Market Multiple
11.3x
Summary
Our base-case estimate uses a discounted cash flow model based on revenue growth and long-run free cash flow margins. We then blend that result with the average analyst price target of $228.11 from 28 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $171.52 per share.
Warnings
Gross margin of 91% means each dollar of revenue is highly profitable. As the company grows, overhead costs should shrink as a share of revenue, boosting overall profits.
Wall Street's average price target is $228.11 (from 28 analysts). Our estimate is 33% below the consensus -- consider that gap carefully.
Key Risks
- Current FCF misleads — the model values future margins, not today's cash
- SBC dilution is the hidden tax: 2-4% annual share growth compounds fast
- Revenue deceleration is inevitable — the question is when and how steep