Reddit Heads Into Earnings With Fresh AI Bull Case – This Analyst Sees Path To 50% EBITDA Margin

• Keybanc initiated coverage on the social media platform with an ‘Overweight’ rating and a $225 price target.
• The brokerage believes Reddit’s data is becoming more valuable to large language models and model training, creating a potential upside catalyst into 2027.
• According to Koyfin, Reddit is expected to report second-quarter revenue of about $730 million on Thursday.

Reddit (RDDT) is drawing fresh attention from Wall Street ahead of its second-quarter earnings due after market close on Thursday, with Keybanc initiating coverage on the social media platform with an ‘Overweight’ rating and a $225 price target. The target implies roughly 25% upside from current levels.

At the time of writing, RDDT stock edged 0.6% higher and is heading for a third monthly gain in four months.

RDDT Stock: A ‘Unique’ Way To Gain Exposure To AI

Keybanc expects Reddit’s investments in community engagement and advertising monetization to create a durable business capable of generating annual revenue growth above 30%. The brokerage also sees a path to a 50% earnings before interest, tax, depreciation and amortization (EBITDA) margin over time, according to The Fly.

Analyst Justin Patterson described Reddit as a ‘unique’ way to gain exposure to the growth of artificial intelligence through an asset-light business model. The firm believes Reddit’s vast network of more than 100,000 Subreddits has become a trusted source of internet content, with users voting on the quality of discussions and answers.

Keybanc argues that Reddit’s content is becoming increasingly valuable for large language models (LLMs) and AI training, creating a potential upside catalyst into 2027. The firm believes Reddit’s traffic is complementary to search, social media, the broader web, and AI platforms, allowing the company to monetize its content through both advertising and data licensing.

Could Losing Google AI Deal Hurt RDDT’s Topline?

Last week, the Wall Street Journal reported last week that Reddit is reviewing whether to continue its 2024 deal that gives Google access to its content for AI training. This led RBC Capital Markets to state that the move “would be a significant step backward,” while Wells Fargo warned it could put pressure on growth, revenue, and valuation in the near term, including a possible $500 million hit to AI licensing revenue. DA Davidson also cautioned that limiting external access to AI could affect daily active user growth, particularly among logged-out users.

Reddit Q2: What Is Wall Street Expecting?

Keybanc forecasts revenue of $3.24 billion in 2026, $4.30 billion in 2027, and $5.46 billion in 2028, with EBITDA projected to rise from $1.43 billion to $2.73 billion over the same period.

For the upcoming quarter, Reddit is expected to report revenue of about $730 million, up from $499.6 million a year earlier, while analysts expect earnings per share of $0.97, more than double last year’s $0.45, according to Koyfin.

Retail Sentiment Mixed Ahead Of RDDT’s Q2 Print

While retail sentiment surrounding RDDT on Stocktwits turned ‘bearish’ from ‘bullish’ over the past 24 hours, chatter was largely positive.

One user expects the stock to rip after Q2 earnings.

Another user highlighted that the stock is approaching a key resistance level even as its story remains “strong” fundamentally.

RDDT shares have been under some selling pressure this year so far, declining more than 26%.

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