KeyBanc bullish on Reddit, sees a "durable compounder" in AI-linked growth

Investing.com -- KeyBanc Capital Markets initiated coverage of Reddit with an Overweight rating and a $225 price target in a note on Wednesday, casting the platform as a durable growth story with a unique tie to artificial intelligence.

Analyst Justin Patterson said Reddit's investments in community and ad monetization should create "a durable >30% annual revenue growth business with a path to 50% EBITDA margin."

KeyBanc added that Reddit's data is becoming more valuable to large language models and model training, "creating a potential upside catalyst into 2027," and called the company "a unique way to participate in AI growth with an asset-light business model."

KeyBanc projects a 35% revenue compound annual growth rate from 2025 to 2028, with EBITDA compounding at 48% annually. It models revenue of $3.24 billion, $4.30 billion and $5.46 billion across 2026 to 2028, running slightly ahead of consensus and more meaningfully above in 2028.

Among the positives, the firm cited a large and growing community that ended the first quarter with 127 million daily active users, an ad model in which more than 40% of activity carries commercial intent, and Reddit's growing role as a source of AI citations for tools including ChatGPT and Google's Gemini.

KeyBanc also flagged risks. It noted other ad platforms have "run into a growth wall between $2.5B-$4B in revenue," a range Reddit now occupies, while public negotiations over its Google deal "could be a NT overhang" and the ad market remains cyclical.

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