I've been looking into Reddit, and it genuinely seems like a very strong business to me:
\- 60%+ revenue growth for seven consecutive quarters,
\- 91%+ gross margins,
\- 40% EBITDA margins,
\- Near-zero CapEx.
It passes my basic filters as a company being in the buy zone. I like it's forward PE ratio of 33x, even though that is high for some folks. This is because of its structural advantages.
The platfrom is built on two decades of authentic human conversation, and that asset is becoming more valuable in an AI-dominated internet.
Other platforms like Facebook, (and especially LinkedIn) are seeing their content commoditized or their traffic disrupted by AI summarization, Reddit is benefiting from both sides of the AI wave:
1. As the primary training corpus for LLMs
2. The destination people turn to when they want a human perspective rather than a machine-generated answer.
The more AI there is, the more Reddit matters.
One thing I would say that is a concern is that despite exceptional performance in the business engine, the product engine is failing to keep up.
In particular, management is concerned about the fact that dailly US average users total 50 million, while the weekly US average users total \\\~200 million.
A platform with genuine daily habit formation does not have this shape. If you look at Facebook, Instagram, TikTok, or YouTube at comparable stages of maturity, the daily-to-weekly ratio is much tighter (because the feed is engineered to create a compulsion loop. You open it not because you have a specific question but because you expect something interesting to be there.)
Reddit does not yet do this for most of its users. The dominant use case for the majority of Reddit's weekly base is still intent-driven. Episodic users do not build daily habits organically.
Despite this, the company is very valuable because its main risk is execution based, and not competition based.
Would appreciate some insights or obvious angles I've overlooked