Loop Capital has expressed optimism regarding future monetization opportunities for Reddit, despite the platform’s current stock performance. In a recent analysis, the investment firm reiterated a buy rating for the social media platform and raised its price target from $225 to $260. This adjustment implies an impressive potential upside of 83%.
Reddit’s stock has experienced a notable decline, dropping 11% over the past 12 months and a staggering 38% year-to-date. Loop Capital analyst Rob Sanderson attributes this trend to the broader sell-off affecting the software sector rather than issues specific to Reddit itself, viewing the decline as an asymmetric opportunity for investors.
“The pullback in Reddit shares, which have decreased 37% this year compared to the S&P 500’s 1% increase, is primarily linked to prevalent fears surrounding AI-related stocks,” Sanderson stated. He believes that as the market corrects from this downturn, investors will likely return to Reddit as risk appetites return to normal.
Sanderson pointed out a fundamental contradiction in current market sentiment, noting that while AI investments are perceived to be driving an infrastructure spending boom, they are simultaneously causing disruptions to established technology stocks. This dichotomy, according to him, has led to widespread risk-off selling, creating a temporary dislocation that represents a buying opportunity for AI-related stocks.
Reddit, in Sanderson’s view, is well-positioned to attract growth investors once market conditions stabilize. He highlighted the platform’s strong advertising revenue growth, which outpaces its sector, asserting that Reddit boasts the fastest-growing advertising business among publicly traded companies in its category.
User growth remains robust, with untapped engagement opportunities—including conversation pages—that could be further monetized. Sanderson emphasizes that effectively monetizing search traffic could yield a significant boost for Reddit. The company has already made strides in enhancing its search capabilities, incorporating AI-powered features like Reddit Answers.
“Search offers some of the highest intent traffic across the industry and is expected to serve as a critical monetization avenue for Reddit,” Sanderson explained. He anticipates that the company will announce new monetization initiatives soon, particularly concerning shopping-related queries, positioning search as an incremental revenue growth pillar for Reddit in the near future.
