Reddit Jumps as Jefferies Sets Street-High $325 Target
Jefferies raised Reddit's price target to $325, implying 40% upside, citing AI data licensing opportunities and strong ad growth momentum.
Reddit's AI story just got a big endorsement.
Shares jumped 3.8% on Friday after Jefferies analyst John Colantuoni raised his price target to $325 from $300—the highest on Wall Street. The call implies roughly 40% upside from current levels and positions Reddit as one of Jefferies' top internet picks for 2026.
The thesis centers on something few social media companies can claim: valuable data that AI models want to consume.
The Data Licensing Play
Reddit's forum structure creates a unique asset.
Unlike Instagram feeds or TikTok videos, Reddit threads contain long-form discussions, debates, and knowledge-sharing across millions of topics. That conversational data is precisely what large language models need for training.
Colantuoni sees data licensing as an underappreciated revenue stream. Reddit has already signed deals with Google and OpenAI to license its corpus for AI training. More agreements could follow as model developers seek differentiated training data.
The bull case writes itself: Reddit monetizes content that users create for free, with minimal incremental cost. If AI training data becomes a sustained revenue line, the margin contribution could be substantial.
Advertising Momentum
Data licensing is gravy. The core business is advertising, and it's performing.
Reddit's most recent quarter showed earnings per share up 400% year-over-year and revenue growth of nearly 68%. Those are acceleration metrics, not maturation metrics. The company is growing faster, not slower.
The improvement reflects Reddit's delayed progress on ad products. For years, the platform undermonetized relative to peers because its ad tech lagged. That's changing. Better targeting, more advertiser-friendly formats, and expanded inventory are translating to revenue.
Colantuoni expects the momentum to continue. Reddit's user base skews younger and more engaged than most platforms, making it attractive for brand advertisers seeking authenticity over polished content.
The AI Disintermediation Risk
Jefferies' note wasn't uniformly bullish on internet stocks.
Colantuoni warned about "AI disintermediation"—the risk that AI tools like chatbots, search functions, and content aggregators reduce traffic to traditional platforms. If users get answers from ChatGPT instead of browsing Reddit threads, engagement could suffer.
It's a real concern. Google's AI Overviews already summarize content from Reddit and other sources, potentially reducing click-through to the original sites. Publishers have complained about traffic cannibalization; Reddit faces similar exposure.
But there's an irony: Reddit benefits from AI training even as it might lose traffic to AI products. The data licensing revenue could offset engagement pressure—a hedge that few peers possess.
Valuation Stretch
Reddit isn't cheap.
The stock trades at roughly 14 times forward revenue, a premium to mature social platforms like Meta (7 times) and Snap (4 times). The valuation assumes years of growth that hasn't yet materialized in GAAP profitability.
Bulls argue the multiple is justified by the growth rate and the optionality from data licensing. Bears counter that Reddit's user base, while engaged, is smaller than competitors and harder to monetize at scale.
The consensus price target is $217, meaning most analysts see limited upside. Jefferies is an outlier at $325. The gap reflects genuine uncertainty about how much AI opportunity Reddit can capture.
Positioning in 2026
Colantuoni's "2026 Internet Playbook" recommends selectivity.
The note suggests that incremental investments could limit margin expansion across the sector, and AI concerns may cap multiple appreciation. Within that framework, Reddit stands out for its unique data asset and improving fundamentals.
Other Jefferies picks include names with AI tailwinds and sustainable competitive advantages. The message: don't buy internet stocks indiscriminately, but own the ones with structural advantages.
For Reddit specifically, execution matters. Can the company continue accelerating ad revenue while building out data licensing? Can it defend engagement against AI-driven alternatives? The stock price assumes yes to both.
Options Activity
Reddit has attracted unusual options flow in recent sessions.
The stock's volatility—common for recent IPOs with high short interest—creates opportunities for traders. Call volume has outpaced puts, reflecting bullish positioning ahead of earnings season.
The broader options market has shown similar bullish skews across tech names. Traders are betting on momentum continuing into January, with Reddit among the more speculative plays.
What to Watch
Earnings are the next catalyst. Reddit reports quarterly results later this month, with attention on user growth, advertising revenue per user, and any updates on data licensing deals.
If management announces additional AI partnerships, the stock could rerate higher. If growth decelerates, the premium multiple becomes harder to defend.
For now, Jefferies is making a contrarian call. At $325, Reddit would be valued like a high-growth software company—a bet on AI data becoming a meaningful profit center.
The market will eventually decide if that bet is right. Friday's rally suggests some investors are willing to take the leap.