Parkev Tatevosian, CFA on $RDDT (Nov 1, 2026)

Reddit is making a major change to the way it allows users to log in to its platform. Previously, you didn't need to log in and you could browse the platform even before logging in.

Now, they require you to log in, otherwise you will not be able to see any of the content. The administration indicated that this policy change reduces the number of people who visit and browse the application.

In addition, the reason they did this was that they were noticing fewer referrals from search engines, especially Google, where people would type in a question and get the answer directly on the Google platform without clicking to go to Reddit.

Therefore, in order to protect itself from this type of search engine behavior , Reddit has made this major policy shift that will cause inconvenience to its current users who do not log in.

Investors punished the stock, and it fell by more than 30% at some point the day after the management team disclosed these changes and the potential consequences they might have .

So, investors are asking me whether this is a buying opportunity or whether it's time to get rid of Reddit stock in light of these structural changes.

Well, the negative effects of these changes have not yet fully materialized. Reddit announced a 53% increase in total revenue to $895 million. It is the fastest-growing social media company by scale when compared to Snap, Pinterest, and Meta Platforms.

In addition, the company achieved operating cash flow of 364 million, which is an improvement and almost double compared to the same quarter last year. So, looking at the performance of the last quarter, you wouldn't think there was anything to worry about.

However, when the administration discussed those factors that I mentioned in the introduction. This is what alarmed many investors.

Now, it is important to look at the balance sheet, which is in excellent condition as Reddit has more than $3 billion in cash and tradable securities. This is especially important when a company is going through a major structural change.

You want to see what kind of cash reserves they have when they take this big step.

The management repurchased approximately 600,000 shares at an average price of $150 per share, spending $100 million and paying significantly more . The stock is currently trading at $90 .

But you can see the effects already starting to show in the next quarter, where the management team is forecasting revenues of just $1 billion. That would represent only a consecutive increase of approximately 100 million over the third quarter.

Remember that the fourth quarter is usually the biggest for social media and advertising companies, as they see a large consecutive increase from the third to the fourth quarter .

This is the smallest consecutive increase that Reddit has achieved in a very long time, if the results come in line with management's expectations.

And you can already start to see some effects on its user base. The number of daily active users in the United States fell to 50.7 million by September 30. This is a decrease from 51.6 million users in the same period last year.

So, there was no overall decrease in the number of people using social media in the United States. Rather, it was a decrease in the number of people using Reddit in the United States .

Thus, Reddit undoubtedly lost market share as a result of that policy change.

I don't use Reddit much , and the only time I logged in during the past few months, I noticed that they were asking me to log in, and I had forgotten my details, so I logged out.

I simply closed the application and never opened it again . So, I'm sure there are other people like me who did the same thing, went to the Reddit app, saw that it was asking them to log in, etc., and maybe closed the app, or even deleted it from their phones.

And you can see how important users from the United States are . The average revenue per user in the United States is $13.82, which is a 53% increase for Reddit compared to international users who generate $2.43.

So, users from the United States are roughly five to six times more profitable for Reddit.

This is especially true if you break down the data further and look at Europe, whose average revenue per user is about half that of its US counterpart, while revenue in any region outside the US, Canada and Europe is down by 80%.

So, this is where you really want to drive your growth in the US, and Reddit is losing users in this category and expecting further declines.

Who knows how long it will take before this situation stabilizes? At a certain point, they will start to attract some of those people who find a reason to go to the Reddit platform, and they will take the time to create a username and password, save them, and then come back to use the platform again.

So, after this 30% decrease, the valuation is cheaper than it has ever been. In fact, the stock is trading at a third of the valuation it had at the start of 2026. It is trading at a forward price-to-earnings ratio of 9.3.

At the beginning of the year, it was trading at a forward price-to-earnings ratio of over 30. This illustrates how huge the change has been, especially after today's stock price crash of over 30%.

So, I updated my Reddit discounted cash flow model, revising my expectations for the amount of cash flow I expect the company to generate between today and the very long term .

I revised those estimates downwards. I have also raised my risk assessment of the company, given the significant uncertainty surrounding how structural changes in the company’s strategic policy will affect its long-term business.

There may be a wider range of results than I previously expected for the company, and this makes it more risky.

When your potential outcomes are within a certain range , and then you move into a wider range, this is a much riskier situation for investors because the potential downside is much larger.

So, I updated that and incorporated it into my review of the company. But even after all that, Reddit stock looks ridiculously cheap right now at $90, near its lowest level in 52 weeks. I calculated a fair value estimate of $153.

The company's total market value is now only $17.4 billion. Therefore, I have rated this stock as a buy opportunity all year, and today I will reiterate the buy recommendation or buy rating in my model.