RDDT
Reddit, Inc.
$200.60
High-Growth Software
80%
Revenue × Terminal Margin DCF
Moderate
·
Conviction
Overvalued
Trading 18.2% above fair value
You pay
$200.60
Bear
$81.35
Fair
$169.67
Bull
$238.53
Bear
$81.35
-59.4%
18% rev growth, 22% terminal margin
Fair
$169.67
-15.4%
30% rev growth, 30% terminal margin
Bull
$238.53
+18.9%
35% rev growth, 34% terminal margin
Key Value Driver
Revenue growth (30%) × margin expansion to 30%
Terminal Value % of EV
58%
Implied Market Multiple
16.4x
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 $220.71 from 28 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $169.67 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 $220.71 (from 28 analysts). Our estimate is 31% 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