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RDDT Due Diligence — Reddit, Inc.

Sam's full due-diligence report on RDDT (Reddit, Inc.) — verdict, conviction score, key metrics, how it trades, options and peers.

Buy8/10Price: $180.71P/E: 50.85Market cap: $34.3BRevenue (TTM): $2.5BProfit margin: 29%

$RDDT Due Diligence — Reddit, Inc.

Buy · 8/10 — full report on Stockato.

Price: $180.71
P/E: 50.85
Market cap: $34.3B
Revenue (TTM): $2.5B
Profit margin: 29%

VERDICT: BUY
SCORE: 8/10
CONFIDENCE: MEDIUM — mixed options/technicals offset strong fundamentals and management

COMPANY OVERVIEW
Reddit operates the largest community-driven social platform, organizing user-generated content across topic-specific subreddits. It sits in Communication Services (Internet Content & Information) with $2.47B TTM revenue, 69% YoY growth, and now GAAP-profitable operations.

KEY FUNDAMENTALS
Revenue TTM $2.47B (+69% YoY), EBITDA $637M (25.8% margin), operating margin 27.6%, ROE 26.2%. P/S 13.85, forward P/E 39.2, EV/EBITDA 49.6. 32 analysts: 21 Buy/Strong Buy, 10 Hold, 1 Sell; consensus target $227.30 (+26% upside). Short interest 12.1% of float.

BULL CASE
- 69% revenue growth + 40% adj. EBITDA margins delivered last quarter (Rule of 40 = 109); KeyBanc sees >30% durable growth path to 50% EBITDA margins.
- Capital-light model: ~$7M annual capex, 91%+ gross margins, 125% TTM ROIC on $492M invested capital.
- Management 9/10 credibility: beat guidance in all 8 tracked quarters, GAAP profitability reached ahead of schedule.
- Analyst target $227 vs $180.70; 89% institutional ownership, only 0.7% insider ownership.

BEAR CASE
- Valuation stretched (P/S 13.85) vs peers like PINS (3.13 P/S); 52-week high $282.95 leaves 36% downside risk.
- Technicals in downtrend: price below 20-day SMA ($187.33), MACD bearish, RSI 39.
- Rising low-engagement/search-driven traffic may erode ad value and sustainability.
- 12.1% short float and 4.08 days-to-cover create squeeze or pressure risk.

OPTIONS POSITIONING
MIXED_FLOW (59% bullish) — $847.5K calls vs $584.2K puts across 30 alerts, net +$263K bullish. IV skew neutral (+0.4pp). Largest trades: $171k SOLD CALL $177.5 2026-08-21 SWEEP; $115k BOUGHT CALL $180 2026-08-21; $115k BOUGHT CALL $235 2026-08-21 SWEEP; $85k SOLD CALL $185 2026-07-31 SWEEP; $82k BOUGHT CALL $200 2026-10-16. Flow shows no strong directional conviction and conflicts with the fundamental growth picture.

X / SOCIAL CHATTER
Reddit’s capital-light model and 125% ROIC on ~$492M invested capital with $7M capex stands out (@AuditTheHerd). KeyBanc highlights path to 50% EBITDA margins via ad-stack and community investments, consistent with 69% revenue growth and 47% FCF margins (@MarcJacksonLA). 20-year archive of verified answers in verticals like r/legaladvice creates untapped optionality in $350B legal services market (@TemptInvest). Contrarian view notes rising low-engagement traffic may reduce ad sustainability (@nickyboonz).

MANAGEMENT CREDIBILITY
9/10 score. Management beat or exceeded guidance in every quarter tracked, delivered GAAP profitability ahead of plan, and maintained disciplined messaging without recurring excuses. Minor deduction only for occasional vagueness on data-licensing timing.

KEY CATALYSTS
Q2 2026 earnings (tomorrow, July 31); potential data-licensing and ad-stack updates.

KEY RISKS
High valuation leaves limited margin of safety; Google/LLM traffic shifts could pressure engagement; macro ad slowdown.

BOTTOM LINE
RDDT enters earnings with accelerating growth, best-in-class margins, and proven execution at a still-discounted multiple to its trajectory. The mixed options flow and technical downtrend warrant caution on size, but the fundamental setup supports a tactical long into the print.

How RDDT trades

41% below its 52-week high; worst drawdown in the past year 53%.

Moved 14.8% on average (absolute) across the last 8 earnings reports.

Behind SPY by 26.3 pts over 3 months.

Trades as a market-like name: β 1.2 to QQQ, 5.4× SPY's volatility.

Realized volatility is 47% over 20 days, calmer than its 1-year 70%.

One-year beta: 2.02 to SPY, 1.24 to QQQ (data-vendor beta 2.05).

Correlation of daily returns: SPY 0.22 (60 days) / 0.38 (1 year); QQQ 0.24 (60 days) / 0.35 (1 year); IWM 0.41 (60 days) / 0.35 (1 year); XLC 0.33 (60 days) / 0.43 (1 year); 10y yield (daily change) -0.27 (60 days) / -0.13 (1 year).

Realized volatility: 47% (20 days), 77% (60 days), 70% (1 year).

Maximum drawdown over the past year -53%; -41% from the 52-week high.

RDDT options and volatility

25-delta puts trade 4.9 vol points below calls in the nearest monthly expiry.

ATM implied vol runs 88% at 1 day to 66% at 162 days (event kink at earnings).

Options price 1.24× the last 20 days' realized volatility.

The first expiry after earnings (2026-10-30, 22 days out) prices ±15.1%, which also covers 22 days of ordinary movement; the average move on earnings day itself has been 14.8%.

Dealers are long gamma; call wall 155.0, put wall 150.0.

Options-implied expected moves: this week (2026-10-09): ±$5.59 (±3.66%); next monthly (2026-10-16): ±$10.43 (±6.83%); earnings expiry (2026-10-30): ±$22.99 (±15.05%).

Options data as of 2026-10-08 07:16 UTC.