Was invested in RDDT since 2024 (guh) and after being down tens of thousands of dollars this year, I need to spread the bear sermon so that Jen Wong doesn't take anymore of you young adult's lunch money. There's a thesis changing element that the regards over at [r/redditstock](r/redditstock) are shrugging off
1. \*\*Google's AI overview is here to stay\*\*. Reddit hasn’t been able to significantly grow US DAU for 2.5 years now and this is an enormous and imo insurmountable headwind (\*\*50% of traffic comes from Google\*\*). People that add “Reddit” to the end of their search query are likely DAU/WAU already anyway. I don’t see any compelling arguments that the US market isn’t already capped. It’s been long enough.
1. Counter: Google's search traffic referrals are low intent!!! RDDT 40-50x PE was given due to sustained growth projections and even 10% slower growth changes the equation significantly.
**Quarter** |**US Logged-In DAUq**
**Q2 2024** |20.4M
**Q3 2024** |21.5M
**Q4 2024** |21.9M
**Q1 2025** |23.0M
**Q2 2025** |22.9M
**Q3 2025** |23.1M
**Q4 2025** |23.0M
**Q1 2026** |23.2M
**Q2 2026** |23.1M
1. \*\*Stagnant US DAU for 2 years straight at this point. US market growth is capped\*\*. All the global DAU growth is coming from India (extremely low margins). Since Reddit can't rely on user growth to fuel revenue growth, they can only rely on ARPU growth and that's easily priced in. C-suite talks about converting logged out to logged in users every single earnings call but haven't been able to execute
2. \*\*Low base effect\*\* leading to impressive looking percentages. Growing revenue $100-$150 million per quarter for a $35B company doesn't deserve a high multiple
3. Terminal growth rate will be reached much quicker than expected because of this and PE will trend towards 10-20 like its more mature peers
4. Recessionary macro environment leads to less ad spend
5. New data licensing deals aren't going to be explosive since LLMs have been trained on all previous data already and up to date circlejerks will have diminishing returns. Reddit needs Google way more than Google needs Reddit.
6. \*\*Peers trade at 10-15 fwd PE. We can be generous and assume EPS for the next 12 months will be \\\~$7. At 15 PE that’s a share price of $105.\*\* Your argument is that revenue is growing 60% YoY!!! My argument is that future growth is \*priced in\* and with stagnant US DAU that curve is \*flattening\* quickly rather than accelerating. ARPU growth is priced in. This is all why multiples will compress, not expand. The hyper growth story is over.
1. Counter: but PINS and SNAP are dogshit companies!!! Correct but unfortunately this is the basket of ad tech companies that RDDT trades with. \*\*PEG of PINS and RDDT is both 0.4\*\*. APP and META also have decent growth and low multiples.
7. $1.2B in projected FCF for 2026 and $1B alotted to buybacks. AND now fully diluted shares is increasing from 206M to 207M. Reddit isn’t expanding its balance sheet and it’s not returning any shareholder value, it’s using all its cash to tread water instead of growing, and it’s using shareholders to fund salaries. All tech companies use SBC but the numbers aren’t conducive to returning shareholder value for this company.
8. I've never bought anything from RDDT and don't really click on the ads either. Myself and most of my friend group HAVE purchased things through Instagram and TikTok. RDDT trails both in average daily time spent on the app by A LOT. \*\*TikTok 1hr 37 minutes, IG 1hr 13min, Reddit 19 min.\*\* Why would advertisers budget a lot of spend on Reddit ads when TikTok and IG would grant way better returns?
If you search Reddit ad experiences on here, it’s 90% complaints that they suck and produce shitty returns and lots of bot impressions.
1. C-suite sent out RDDT Bag Holder carabiners prior to the last earning report because they didn't have the foresight to see that lower DAU would tank the stock. Is this management team the one you have confidence in?
The reality: RDDT has been FLAT since Nov 2024, investors have missed out on 2 YEARS of opportunity cost, Jen Wong has sold like a BILLION dollars worth of shares, and now there's a thesis changing headwind.
PT $120 by December
inb4 the bulls flock in here \*\*citing only backwards looking data\*\* (60% YoY growth!!!!!), inb4 bottom signal