Enes Uludağ
US Equity & Global Macro Analysis, Financial Statements & Sector Research
Reddit may face short-term pressure after Morgan Stanley cut its price target from $240 to $210 while keeping Overweight, adding risk premium for possibly slowing user growth and shifting Google traffic, especially AI Overviews reducing referrals. Morgan Stanley stays positive on revenue and EPS growth, and advertising, AI data licensing and Reddit Max remain long-term catalysts. Renewed strength in Google traffic and DAU/WAU growth could bring the target back up. x.com
Reddit is more likely to break upward from its months-long narrowing symmetrical triangle, given growing advertising revenue, an expanding user base and strong momentum in data licensing. Technically the direction is still uncertain, but as price nears the apex a breakout is getting closer, and the longer the compression lasts, the more powerful the move tends to be. x.com
Reddit's worsening US user growth threatens its revenue runway despite elite ARPU growth, revenue growth and margin expansion. US daily users fell 2% year over year and missed estimates by 7%; the Q4 guide was weak. It needs healthier user growth in its most important market to dispel Google/AI discovery fears. Forward indicators do not look promising, and the trend of positive estimate revisions will end. x.com x.com
Reddit's Q3 drop in US daily users risks another poor market reaction, even if headline earnings are strong. Last quarter a slight sequential decline in US daily users sent the shares down 20% despite a massive triple beat; the new chart shows a further sequential drop in Q3. x.com x.com
Reddit's logged-in users drive monetization, so weak search-driven traffic matters less than ARPU. Reddit says app and logged-in users grew sequentially in Q3 and generate over 80% of monetization, though lost search referrals also hurt them. ARPU rose 53% despite barely higher users; a low ad base could allow it to double even with muted growth. Restricting Google scraping might force a licensing deal that helps its Anthropic case and OpenAI renewal, though no deal is certain. x.com x.com x.com … Show more
Reddit's stock is unlikely to rerate until it shows cleaner US daily user growth and less reliance on volatile search referrals, despite a strong financial engine. US DAUq grew only 6% versus 28% internationally, logged-in growth was just 7%, and management called search traffic volatile. The 100M US DAU goal looks further away, AI licensing showed no progress with other revenue up 24% to $43M, and the $860-870M Q3 revenue guide did not address user concerns. x.com
Alphabet's businesses beyond search are why it will lead the real AI boom. Google Cloud, DeepMind and Waymo broaden its reach, and its $900 million SpaceX investment is now worth $85 billion. Fear emerging as the shares fall is an opportunity; a decline toward the buy zone is welcome, even as Q3 capex has taken a large hit out of free cash flow. x.com x.com x.com x.com
Reddit's human conversations are gaining value as AI content proliferates, supporting advertiser spending and AI data licensing. Revenue grew 61% last quarter, with margins in the 40s, but US user growth slowed to 6%. Advertisers are paying more each quarter and AI labs pay for Reddit's data. Overweight; $200 target. x.com
Alphabet's exceptional revenue growth and expanding margins make a discount attractive if the market offers one. Quarterly revenue reached $125 billion, up 25%; search is growing faster than YouTube ads. The disappointing result reflects a mark-to-market on SpaceX, while the earnings call sounded great. x.com x.com x.com x.com
Alphabet's AI-mode ads could move the needle, giving the stock a tentative upside bias despite search uncertainty. Search supplies $39b of $41b in quarterly segment profit, but its revenue growth slowed to 12% and will likely slow to 10% in Q4. Queries remain healthy; Alphabet says AI queries are mostly additive. Cloud revenue grew 96% year over year. At 18x a slightly above-consensus 2027 GAAP EPS estimate for over 30% operating profit growth, the stock remains a tough call. x.com x.com x.com
Reddit's push toward required logins could improve targeting and monetization but may hinder search discovery and add friction for casual users. Revenue rose 53% to $895M and free cash flow reached $363M, yet overall user growth lagged despite a good showing from US logged-in users; stock-based pay was higher than desired. Google will probably pressure near-term DAU growth. The finances remain solid, but the login strategy's impact on growth needs more clarity. x.com x.com x.com x.com
Google's AI Mode no longer drives traffic to Reddit, weakening its distribution. Reddit CEO Steve Huffman said Google still crawls Reddit heavily but no longer sends it the traffic it once did, and Reddit cannot count on that traffic returning. x.com
