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Reddit's IPO Approaches with High Demand, Targets $6.5 Billion Valuation

+ 2 stock ideas | TikTok challenges | Apples AI acquistion

TECH BRIEF

Reddit's IPO Approaches with High Demand, Targets $6.5 Billion Valuation

Reddit, the popular social media platform, is expected to hit its targeted valuation of $6.5 billion in its forthcoming initial public offering (IPO), despite past struggles to generate profit. Sources suggest that the company’s IPO is oversubscribed between four to five times, indicating a strong investor interest.

The oversubscription signals a likelihood for Reddit to reach its expected share price of $31-$34 during the IPO pricing in New York set for Wednesday. However, this predictor falls short on guaranteeing a robust stock market debut.

Reducing its financial aspirations from a previous $10 billion private fundraising valuation in 2021, the current IPO aims to raise to the tune of $748 million. This comes amid several years of consistent losses for Reddit, which has struggled to match the commercial success of its peers such as Meta Platforms' Facebook and Twitter.

Contemporary trials of Reddit include a unique user base concentrated on niche subjects and a hands-off content moderation approach. Content moderation by volunteer users has occasionally led to discontent, with some moderators protesting against the firm's decision to monetize third-party app access to user data.

The company intends to allocate 8% of the total shares on offer to eligible users, moderators, certain board members, and family and friends of its employees and directors.

Despite the hurdles, Reddit's platform had an average of 73.1 million daily active users at the end of 2023, underscoring the popularity of its platform and potential for success in its forthcoming IPO.

📉 TikTok Challenges - TikTok, valued at $150 billion, faces a mandated sale by the US House, risking a nationwide ban for not divesting in six months, complicating its 170 million US user base's future. ByteDance, aiming for global social media dominance with $16bn US and $120bn global revenues, confronts US legislative threats, with former Treasury Secretary Steven Mnuchin eyeing a buyout. China opposes the forced sale, adding to the geopolitical tension and antitrust concerns surrounding the potential transaction.

🍏 Apple's AI Strategy - Apple acquires DarwinAI, a firm enhancing AI in manufacturing, to boost its machine learning team and compete with Google and Meta. Meanwhile, Meta faces a federal probe over allegations of facilitating drug sales on Facebook and Instagram, led by Virginia prosecutors and the FDA. This highlights Meta's challenges in content monitoring and Apple's push for innovation.

💡 Our stock ideas are gathered from various online sources and curated by us.

We only share the best tech investment ideas from hedge funds, professional analysts, investment blogs, and more!

STOCK IDEA - Alphabet

Alphabet (GOOGL): Unveiling the Investment Gem - A Strategic Deep Dive into the Cheapest Trillionaire

Alphabet (Google) stands as a compelling investment proposition, characterized by its unparalleled dominance in online advertising, robust growth in cloud computing, and promising ventures like Waymo. With over $100 billion in cash and modest long-term debt of $11 billion, Google's financial health is beyond reproach. The potential acquisition of TikTok and strides in Google Cloud underscore its strategic diversification and innovation prowess.

The recent downturn following the Gemini image generator episode has unjustly penalized the stock, offering an attractive entry point. The company's diverse revenue streams, coupled with a formidable growth trajectory in its services segment, underpin a bullish outlook. Despite trading at a forward 2025 P/E ratio of 15X—suggestively modest given its growth projections—Google assures value realization over our 24-36 month investment horizon.

Conclusively, Google emerges as a resilient "Strong Buy," leveraging its financial stability, strategic acquisitions, and innovative capabilities to navigate market volatilities and regulatory landscapes. This synthesis of strength and opportunity heralds substantial upside potential, validating our target price of $188

Ticker: GOOGL | Price: 135 | Price target: 188 | Timeframe: 24-36 months | Source: Seeking Alpha

🖥️ Technology Sector | 💎 Undervalued Giant | 📈 Bullish idea

STOCK IDEA - Y

Shopify (SHOP): A Hidden Gem in E-Commerce with Unmatched Growth Potential

Shopify, a leader in e-commerce platforms, is positioned for a compelling growth trajectory, making it an attractive investment with a target price of $115 within 24-48 months. The company's platform offers mission-critical tools and services, ensuring high switching costs and low churn. Shopify benefits from significant economies of scale, a growing network effect, and possession of valuable intangible assets, contributing to its high competitive moat.

Recent developments highlight Shopify's resilience and potential for sustained growth, with a notable top line growth exceeding 20% YoY in 2022, despite economic challenges. The company's strategic price adjustments and enterprise focus underline its competitive advantage and operational efficiency.

Valuation metrics might seem steep with a sales multiple at 14x and EV/EBITDA at ~74x. However, considering Shopify's projected 19.8% annual sales growth and 32% EPS growth, the stock appears undervalued. Current market mispricing presents an opportune entry point, with expected valuation normalization and significant financial improvement by 2027.

Risks stem from growth sustainability and macroeconomic factors. Yet, Shopify's strong business fundamentals and growth potential make it a compelling investment, with a strong buy recommendation for outperformance in the coming years.

Ticker: SHOP | Price: 105 CAD | Price target: 115 CAD | Timeframe: 24-48 months | Source: Seeking Alpha

🛒 E-Commerce | 🚀 Undervalued | 📈 Bullish idea

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