Reddit Just Scored a New 'Outperform' Rating. What Comes Next for RDDT Stock.
Reddit Just Scored a New 'Outperform' Rating. What Comes Next for RDDT Stock..
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Reddit (RDDT) stock received a new "Outperform" rating and $250 price target from Wedbush's analyst Ygal Arounian on Thursday, with the firm naming it a top mid-cap internet pick based on community engagement strength and AI monetization potential.
Despite the bullish catalyst, Reddit shares tanked about 4% on July 16 as a broader tech sector de-risking overshadowed the positive initiation. Year to date, the stock is down nearly 20%.
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The selloff was driven primarily by TSMC's (TSM) quarterly results, which confirmed robust AI demand but simultaneously raised capital expenditure outlook to $60-$64 billion, signaling that scaling AI infrastructure will be extraordinarily expensive.
This capex reset triggered a multiple de-rating across AI stocks, with investors questioning whether downstream software and data monetization firms can ultimately justify the hardware investments being made upstream.
Reddit, having rallied recently as a high-multiple AI name due to its data-licensing arrangements, proved particularly vulnerable to this valuation debate.
Wedbush's broader internet sector initiation positioned Alphabet (GOOG) (GOOGL), Uber (UBER), Reddit, and Xometry (XMTR) as top picks across different market-cap tiers, with the analyst calling AI the single most impactful swing factor shaping the sector's outlook.
The investment firm stated that companies with the strongest combination of technology, product, and distribution are best positioned as AI reshapes the internet industry.
Its $250 price target on RDDT stock signals more than 30% upside from here, reflecting substantial conviction in the company's trajectory.
The fundamental investment thesis for Reddit shares centers on its data licensing business, which currently generates $130-$200 million annually through deals with Google (roughly $60 million per year) and OpenAI (roughly $70 million per year).
CEO Steve Huffman has been pushing to convert the 2027 renewals of these flagship agreements from flat fees to usage-based, dynamic pricing that would compensate Reddit proportionally as its data becomes more integral to AI-generated answers.
Wells Fargo has estimated that renegotiated terms could lift combined licensing revenue toward $550 million, representing a potential tripling of the current run rate.
Reddit's recent operational moves reinforce its data moat thesis. The company has deployed LLM-based spam detection systems that catch approximately 25,000 net-new spammy posts daily, block roughly 23 million spam views per day, and revoke nearly 2 million inauthentic votes daily, cutting user spam exposure by about 20% over three months.
This effort to combat generative engine optimization directly protects the authenticity and value of Reddit's human-generated corpus, which is precisely what AI labs are paying to license.
