Investing.com -- Bank of America remains Neutral on Reddit shares despite the social media platform's year-to-date pullback, arguing that while the company has genuine long-term growth drivers, its premium valuation and macro sensitivity make it difficult to turn more constructive right now.

Analyst Justin Post lowered the RDDT price target to $175 from a prior revenue-based target of $205, shifting to an EBITDA valuation framework to reflect a more mature margin profile.

He explained that at roughly $136, Reddit trades at 6.2x 2027 estimated revenue and 14x 2027 estimated EBITDA, both at significant premiums to peer medians of 3.5x and 9x, respectively.

BofA flagged several positives, including a meaningful monetization gap versus peers, revenue upside from data partnership agreements and search advertising, and Reddit's role as a structural input for AI models, which the bank believes could support improved AI licensing deals in 2027.

On the risk side, BofA pointed to slowing logged-in user growth, heavy dependency on Google for referral traffic, and rising competition from generative AI platforms including ChatGPT, Gemini and Claude.

"Given discretionary nature of online advertising spend, higher expected Reddit growth rates vs the sector, and a premium valuation to peers, we see Reddit as one of the most macro sensitive stocks in our coverage group," Post wrote.

BofA added that the stock would likely be "an outsized beneficiary of any ME conflict resolution" but said current uncertainty justifies maintaining the neutral stance.