‘Poor man’s Twitter’: Reddit gets lukewarm Wall Street welcome



Reddit’s first batch of analyst reviews were mixed at best, putting further pressure on the newly public social media company as it navigates a significant downswing in its valuation.

Reddit Begins Trading On New York Stock Exchange

Reddit debuted on the New York Stock Exchange on March 21.

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Key Facts

Bernstein analysts led by Mark Shmulik and Baird analysts led by Colin Sebastian became the first institutional groups to initiate coverage on Reddit two weeks after its initial public offering.

Shmulik set a $40 price target with an underperform (sell) rating and Sebastian at a $50 price target with a neutral (hold) rating.

Though both firms’ analysis put Reddit’s fair-value at close to its $46 share price Thursday and comfortably above its IPO price of $34 per share, it’s a far cry from its March 26 peak of $75, indicative of the growing pains they expect Reddit to face.

The more pessimistic Shmulik explained Reddit’s long-run vision of simultaneously expanding its user base, advertising revenues, and profitability “are promises we’ve heard too many times,” alluding to the struggles faced by public social media firm predecessors Pinterest, Snapchat parent Snap and Twitter, the private company known as X which traded publicly from 2013 to 2022.

The Baird group noted that despite its strong impression of Reddit’s “attractive, capital-light model,” the company’s already “premium” valuation compared to peers means its upside is largely priced in.

Reddit’s enterprise value is 79.5 times its projected 2025 earnings, more than double the relative valuation of any of its 12 closest comparable public companies, as identified by Baird, and about 6.5 times higher than the average multiple of 13 of its peers.

Crucial Quote

Bernstein set Reddit’s bullish outcome as a “poor man’s Twitter,” a not “necessarily that inspiring” best-case scenario for Reddit, considering Twitter went private two years ago at a valuation far below its 2013 peak.


Both Shmulik and Sebastian warned in their reports of the potential impact of ill-intentioned retail traders on Reddit’s stock. Sebastian deemed the potential for “meme-stock status…to drive share performance disconnected from fundamental valuations” as his top risk factor for his Reddit valuation, and Shmulik dubbed Reddit an “institutional meme stock,” mentioning the “army” of retail traders who congregate on Reddit forums.

Surprising Fact

Reddit is not the only freshly public social media company turned meme stock. Trump Media, the entity behind right-wing social media platform Truth Social, which is majority owned by former President Donald Trump, went public via reverse merger last week. Trump Media actually briefly reached a peak market capitalization higher than Reddit’s, despite raking in roughly 0.3% of Reddit’s revenues during 2023’s final quarter.

Key Background

Reddit’s $7.3 billion market cap Thursday is above its $6.5 billion valuation at its IPO but less than its $10 billion private market valuation in 2021. Founded in 2005, Reddit is an amalgamation of thousands of community forums, or subreddits, ranging in interest from news to education to pornography. Reddit stock’s initial rally followed by a sharp drawdown is similar to the behavior of many other fresh-faced stocks, such as last year’s biggest IPO in British semiconductor chip designer Arm Holdings, whose shares jumped 25% in their September debut before falling 20% within a week.

This article was first published on forbes.com and all figures are in USD.

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