Summary: Piper Sandler lowered its price objective for Reddit (NYSE: RDDT) to $205.00 from $290.00 but kept an Overweight recommendation on the social platform’s shares. The research note frames the reduction as a reflection of multiple compression rather than a change in the research firm’s view of Reddit’s underlying business performance.
Piper Sandler action and market reaction
Piper Sandler’s move comes as Reddit shares have declined 16.21% over the past week, with the stock trading at $145.72 at the time of the report. Despite the price-target cut, the firm reiterated its positive stance on the company, pointing to recent quarterly results that outperformed its prior forecasts.
Quarterly results and underlying metrics
In its latest quarter, Reddit reported topline and profitability metrics that the firm described as "solid results with stellar revenue growth and profitability." Revenues and EBITDA beat Piper Sandler’s internal forecasts by 9% and 17%, respectively. Data from InvestingPro included in the note shows Reddit delivered 69.4% year-over-year revenue growth and maintained a gross profit margin of 91.18%.
Daily active users performed ahead of expectations, although the magnitude of the beat was smaller than in the prior quarter. The note emphasizes that these operational outcomes contributed to the firm raising its model estimates for the company and reflect positively on management execution.
Valuation and management commentary
Piper Sandler underscored that the price-target reduction principally reflects multiple contraction rather than an erosion of fundamentals. Reddit currently trades at a price-to-earnings ratio of 80.76, a level the firm identifies as elevated even in the context of robust growth. The research note also praised management for "executing phenomenally well" and called attention to product enhancements scheduled for 2026 as well as potential benefits from data licensing renewals.
The firm said it increased its estimates for Reddit while expressing support for management’s product roadmap and capital return strategy.
Industry and analyst reactions
Reddit’s fourth-quarter financials attracted broad analyst attention. The company reported revenue of $725.6 million, up 70% year-over-year, and adjusted EBITDA of $327 million, representing a 112% increase versus the prior year. These results topped many analysts’ expectations.
Individual analyst moves highlighted a range of views: Needham kept a Buy rating and a $300 price target, citing the strong quarter; Raymond James reiterated a Strong Buy rating with a $250 target while pointing to the notable revenue and EBITDA gains. Cantor Fitzgerald reduced its target to $170, citing concerns about user growth even as revenue and EBITDA exceeded estimates. Guggenheim lifted its target from $245 to $255 and maintained a Buy rating, noting strong usage metrics and upcoming advertising initiatives. Citizens retained a Market Outperform rating with a $300 target, emphasizing that revenue beat guidance by over $60 million and that advertising revenue growth accelerated.
Takeaway
The spectrum of analyst reactions illustrates differing interpretations of Reddit’s growth outlook and valuation. Piper Sandler’s price-target cut signals sensitivity to sentiment-driven multiple shifts despite the company’s recent operating beats and management’s execution. Market participants will likely monitor user growth trends and any progress on the product improvements and data licensing opportunities cited by analysts.
Key points
- Piper Sandler trimmed its Reddit price target to $205.00 from $290.00 while keeping an Overweight rating.
- Reddit posted revenue and adjusted EBITDA that exceeded Piper Sandler’s forecasts by 9% and 17%, respectively; InvestingPro data shows 69.4% revenue growth and a 91.18% gross margin.
- Analysts remain split on valuation and user-growth outlooks amid strong quarterly results and differing price targets.
Risks and uncertainties
- Valuation risk - Reddit trades at a P/E of 80.76, which the research firm views as high even with strong growth, creating exposure to multiple contraction in a changing market environment.
- User-growth uncertainty - Some analysts cited concerns about user growth despite the company beating revenue and EBITDA estimates, which could affect monetization momentum if trends soften.