Reddit answers almost everything post-IPO

Thanks for asking. True to its Q-and-A business model, Reddit came ready with some answers on Tuesday. In the social media site’s first quarterly results since making its market debut six weeks ago, boss Steven Huffman addressed many of the concerns that were raised at the time. The valuation, however, remains questionable.

Reddit said it generated $243 million of revenue in the first three months of 2024, 48% more than over the same stretch last year. The increase was largely thanks to advertising from drugmakers and packaged food and household-goods producers, and exceeded the 21% growth at rivals Snap and YouTube.

Moreover, the $8 billion host to thousands of community forums generated EBITDA, after stripping out stock-based compensation, of $10 million compared to a $50 million loss in the first quarter of 2023. Reddit is also attracting more users; the daily active count rose 37%. Taken together, the numbers should help ease nagging worries about the company’s ability to make money following 20 years of effort.

After selling shares for $34 apiece in its March initial public offering, Reddit’s stock price jumped 48% on the first day of trading. It has clung to those gains in a flat broader market. Even with its impressive growth, the company looks generously valued compared to other social media networks dependent on advertising.

The Reddit enterprise is fetching 11 times trailing 12 months sales while Facebook owner Meta Platforms and Pinterest are pegged at 8 times. Both peers also have better EBITDA margins. Reddit’s AMA, or ask me anything, sessions are a long-held tradition. On this valuation discrepancy, there does not appear to be a good answer.