Is Reddit's Stock Collapse a Buying Opportunity?

Key Points

• Shares of Reddit are down 43% this year, but the platform is experiencing a surge in users and ad revenue.
• The company’s earnings remain strong, with seven consecutive quarterly beats as well as revenue growth of 69% last year.
• The average 12-month analyst price target suggests that shares of RDDT could see massive potential upside to the tune of 78%.

Almost exactly two years removed from its initial public offering (IPO), Reddit NYSE: RDDT is proving to be one of the hardest hit mid-cap stocks of the year.  

The pain began last October, when news broke that ChatGPT was reducing its reliance on Reddit for sourcing content for generative responses. Then, the Q4 2025 tech stock sell-off, which spilled over into 2026, compounded those losses. 

Today, shares of the online social news aggregation, discussion, and content-sharing platform are down more than 43% year-to-date (YTD) and down nearly 48% from the all-time high on Sept. 19, 2025. 

But for current shareholders and prospective investors, there are plenty of reasons to be bullish about the stock’s future.  

Breakout 2025 Results Set Up a Confident 2026 Outlook

Advertising is Reddit’s principal revenue driver, and 2025 was a banner year for the company.

In Q4 alone, ad revenue grew by 75% year-over-year (YOY) to $690 million. Lower-funnel performance was also notable, with conversion volumes doubling. 

This, among other factors, contributed to positive capital allocation and guidance. Reddit’s board authorized a $1 billion share repurchase program, with the company issuing Q1 2026 guidance targets of $595 million to $605 million in revenue, which would represent approximately 53% YOY growth. 

Guidance also included adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $210 million to $220 million. That comes on the heels of a staggering 200% YOY EBITDA growth seen in 2025. 

That increase reflects a strong user base that is getting larger each year. In his earnings call comments, cofounder and CEO Steve Huffman noted that in Q4 alone, Reddit welcomed over 121 million daily active users, up 19% YOY, and over 471 million weekly active users, up 24% YOY.

But beyond the numbers, Huffman noted that the platform is increasingly appealing to users looking to “connect, learn, and research,” with Reddit offering “the most human place on the internet…in a world flooded with AI slop.”

Ultimately, more users equates to more interest from advertisers, which in turn is fueling the company’s top and bottom line growth at a record pace.

Checking Under the Hood: Reddit’s Financials Fuel the Bull Case

When the company reported full-year and Q4 2025 financials in February, it announced quarterly revenue in excess of $725 million—a record for Reddit—well above analyst expectations of nearly $666 million. 

That revenue growth has become a hallmark for Reddit, which has seen annualized growth climb year after year. On a quarterly basis, that metric ranged from more than 61% to nearly 78% last year, finishing 2025 with YOY revenue growth of 69.4%. 

Meanwhile, the company’s earnings continue to grow as a result. Since missing analyst expectations in Q1 2024—its first earnings report after going public—Reddit has put together a run of seven consecutive quarterly earnings beats, including earnings per share (EPS) of $1.24 in Q4 2025, marking the company’s largest beat to date on the back of record net income. 

Much of that earnings growth can be attributed to the aforementioned YOY revenue growth, a trend that is expected to sustain and contribute to Reddit’s EPS growing by nearly 95% next year from $1.12 to $2.18 per share.

Another indication of Reddit’s financial health is the company’s gross margins across the past three years, which have not only been exceptionally high but steadily improving. In 2023, that figure stood at more than 86%. In 2024 when the company held its IPO, gross margins improved to more than 90%. Last year, for the first time ever, they exceeded 91%. 

What Wall Street Is Saying About Reddit

RDDT has a consensus rating of Moderate Buy from 29 analysts, with 18 of them (62%) rating the stock a Buy. The consensus price target of $242.19 suggests potential upside of nearly 78%. 

Reddit scores higher than 88% of companies evaluated by MarketBeat, which aligns with the buying activity of institutional owners who have been piling into RDDT. Over the past 12 months, inflows of more than $10 billion have easily surpassed outflows of around $4 billion, with 726 buyers outnumbering 303 sellers. 

The current short interest of 14.70%—or $2.68 billion worth of shares—is not insignificant, but that dollar figure is notably lower than the $5.19 billion worth of shares that were shorted in September 2025 when short interest for Reddit reached its peak.   

Meanwhile, for the first time since going public, insider buying, despite trailing insider selling, has resulted in $8.87 million worth of shares being purchased in Q1.