Reddit – (RDDT) $57 Hold, till post lock up expires on 8/9, we might get it around $50
Last week I had written on Reddit when the stock was in the mid 60’s suggesting a Hold till it dropped 20-25% to around $50-54. Their lock up period post IPO expires on 8/9 and there could be a lot of shares for sale. With the recent turmoil I want to wait longer.
Here’s the link.
https://seekingalpha.com/article/4706184-reddit-waiting-for-a-better-price
Summary
Reddit has an excellent business model of unique Subreddits.
Its user base is enthusiastic, passionate and sticky.
Reddit’s data licensing revenue stream is an excellent opportunity to grow – currently contracted for $203Mn for 2-3 years and a very profitable business.
Reddit turned cash flow positive for the first time last quarter with a margin of 12%.
The stock is expensive at 10X sales and could fall once the lock-up period post its 2024 IPO expires in August.
Its biggest weakness is a low Average Revenue Per User (ARPU) $4.77, even Pinterest and Snapchat earn almost double – around $8, and Facebook is in a different league at $68, but this should only grow from such a low base.