Is Reddit (RDDT) Pricing Make Sense After Recent Share Price Pullback?
If you are wondering whether Reddit's current share price lines up with its underlying value, you are not alone. This article is designed to walk you through that question step by step. Over the last year, Reddit's share price return sits at 20.0%, even though the stock has seen a 5.3% decline over the past week and a 3.1% decline over the last month, with a year to date return of a 9.5% decline from its recent levels around US$218.88. Recent coverage around Reddit has focused on its role as a major social platform for communities and its position as a listed social media company. This keeps attention on how the market views its long term potential. This broader discussion helps frame why the share price has been active recently, as investors weigh the company’s user base, engagement, and monetization story. Right now, Reddit has a valuation score of 2 out of 6, which means it screens as undervalued on 2 of the 6 checks we use. Next we will walk through the main valuation approaches behind that score before finishing with a way to think about Reddit's value that goes beyond the usual ratios and models. Reddit scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown. Approach 1: Reddit Discounted Cash Flow (DCF) Analysis A Discounted Cash Flow model takes Reddit’s expected future cash flows, then discounts them back to today’s dollars to estimate what the entire business could be worth right now. Reddit’s latest twelve month free cash flow is about $503.6m. Using a 2 Stage Free Cash Flow to Equity model, analysts and extrapolated estimates project free cash flow rising to around $3.4b in 2030, with a series of annual projections between 2026 and 2035 that are converted into today’s dollars using a discount rate. Across those years, the discounted cash flows range from roughly $1.0b in 2026 to about $2.5b by 2035, all stated in today’s dollars. Adding these together and including a terminal value gives an estimated intrinsic value of about $384.10 per share under this DCF approach. Compared with the recent share price around $218.88, this DCF estimate implies the stock trades at roughly a 43.0% discount to that intrinsic value, which points to Reddit screening as undervalued on this model. Result: UNDERVALUED Our Discounted Cash Flow (DCF) analysis suggests Reddit is undervalued by 43.0%. Track this in your watchlist or portfolio, or discover 873 more undervalued stocks based on cash flows. RDDT Discounted Cash Flow as at Jan 2026 Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Reddit. Approach 2: Reddit Price vs Earnings For profitable companies like Reddit, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. It quickly links the share price to the business’s current profitability, which many investors find easier to interpret than cash flow models. A “normal” or “fair” P/E ratio tends to be higher for companies where investors expect stronger growth and lower business risk, and lower for companies with more uncertain outlooks or thinner margins. So context really matters when you look at any single P/E number. Right now, Reddit trades on a P/E of 118.79x. That sits above the Interactive Media and Services industry average of 15.64x, and also above a peer group average of 48.27x. Simply Wall St’s Fair Ratio for Reddit is 37.87x, which is its estimate of an appropriate P/E once factors like earnings growth, industry, profit margin, market cap and risk are considered together. This Fair Ratio is more tailored than a simple peer or industry comparison, because it adjusts for Reddit’s own characteristics rather than assuming all companies in the same industry deserve similar multiples. Comparing 118.79x to the Fair Ratio of 37.87x suggests Reddit currently screens as overvalued on this metric. Result: OVERVALUED NYSE:RDDT P/E Ratio as at Jan 2026 P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1429 companies where insiders are betting big on explosive growth. Upgrade Your Decision Making: Choose your Reddit Narrative Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are Simply Wall St’s way of pairing a clear story about a company with the numbers behind it. A Narrative is your description of what you think is happening at Reddit combined with your own fair value, plus your estimates for future revenue, earnings and margins, so the story is always tied back to a concrete forecast. On Simply Wall St’s Community page, used by millions of investors, Narratives are easy to set up and compare. They help you decide what to do by lining up your Fair Value against the current share price so you can quickly see whether Reddit looks expensive or cheap based on your assumptions. Narratives also update automatically when new information such as earnings releases or major news is added. You might see one Reddit Narrative arguing that strong community engagement supports a higher fair value, while another assumes slower monetization and a lower fair value, giving you a clear view of how different investors interpret the same data. Do you think there's more to the story for Reddit? Head over to our Community to see what others are saying! NYSE:RDDT 1-Year Stock Price Chart This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.New: AI Stock Screener & AlertsOur new AI Stock Screener scans the market every day to uncover opportunities.• Dividend Powerhouses (3%+ Yield)• Undervalued Small Caps with Insider Buying• High growth Tech and AI CompaniesOr build your own from over 50 metrics.Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
