As of the market close on May 31st, Reddit’s stock was priced at $54.28 per share, with a market cap of $8.875 billion. In my opinion, it’s still a good investment.
As a heavy Reddit user, I’m admittedly biased. But as Peter Lynch, the investor who influenced me the most, says, you should invest in things you know. I like Reddit and use it often. If you don’t like Reddit and rarely use it, then my advice would be, stop right here and don’t invest in Reddit. I’ll explain why later.
Let’s start with the negatives. I was using Apollo, a third-party app before Reddit basically killed all these third-party apps. It was a huge scandal at the time. I even stopped using Reddit for a while afterwards. Obviously, I came back. Reddit has long been my favorite “social media”. It’s the only social network I can see meaningful discussions between complete strangers. The focus is also on the discussion, the content, instead of getting attention and followers. Reddit is also super helpful. Countless times I’ve found the answers I needed from Reddit. I’m also not the only one — many people append “reddit” to their Google search in order to find what they want.
What I like about Reddit is that it’s about in-depth discussion. Many people like Twitter for its real-time information sharing. I can see the benefits but I prefer in-depth discussions. I haven’t used Twitter for at least three years, and I don’t miss it at all. I find it’s hard to have meaningful discussion there. On Reddit, I find more people engage in good faith when arguing with others, instead of trying hard to “own” someone else. The content matters significantly more than who posts it. I don’t have the illusion that Reddit is the best thing in the world. Reddit has terrible people on it as well, and I’ve encountered quite a few. But still, in comparison to sites like Instagram, it’s definitely significantly better.
Reddit is also about human experiences and opinions. AI can certainly answer a lot of questions one would otherwise resort to sites like Reddit for. StackOverflow is one such example. I can’t remember the last time I used StackOverflow since the arrival of ChatGPT and Gemini. I used to use it every day for work. Although both ChatGPT and Gemini already train on Reddit posts, they can’t replace Reddit like they did with StackOverflow because Reddit is not only a place people turn to for factual answers, but also a place where people share their personal experiences. Factual questions include questions like “how to do …?” or “why/what is …?” Why is the sky blue? How do I take public transit in Poland? What app do I need to use? This kind of information doesn’t change often, and ChatGPT is competent once it’s trained on that information. I actually found the answer to the public transit question on Reddit. However, I just tried with ChatGPT and Gemini, both also give me the same answer as Reddit did (the Jakdojade app), and they would have saved me time. On the other hand, one wouldn’t ask ChatGPT, “what’s your opinion on Billie Eilish’s newest album?” ChatGPT can certainly tell you what the critics think of it (factual information), but it itself doesn’t have an opinion about it (just yet). Questions like “what is it like growing up in Switzerland as an Asian?” require deeply personal experiences to answer. And the most likely place to see someone sharing that experience on the internet would be Reddit.
I think we can all agree that Reddit is valuable, but does Reddit make money? Well, Reddit is still losing money. When one wants to invest in an individual company, as opposed to a broad market index, one must read its existing financial reports. Like all public companies, Reddit has an investor’s website that has all the information. A good place to start would be their first quarter shareholder letter. I strongly advise against investing in Reddit, or any other individual company, without doing due diligence on them. It can be hard at first to know what to focus on when one first reads a document such as the shareholder letter. Is having 82.7 million DAUq good enough? Is 37% y/y growth a good growth rate? How does one derive a reasonable figure for Reddit’s market cap? Well, there are no easy answers to these questions because evaluating a company is no easy task, especially when a company is not yet profitable. In the end, it’s about how confident you are about the user growth and the ability of the company to monetize the product. It’s much easier if you’re a heavy user of the product of said company and read all the publicly available information shared by the company.
I’m reasonably confident about Reddit’s prospects. I actually believe it’s very likely it will become a $20 billion company in the next few years. The thing is, you can’t rely on other people’s conviction when investing your money. There are people out there who are convinced Tesla will be a $1 trillion company again and that bitcoin is totally the future. Honestly, I couldn’t care less what they think. I only invest my money in things I believe in. You should too.