1 Reason Now Might Be the Perfect Time to Buy Reddit Stock
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Analysts expect its free cash flow to soar over the next four years.Reddit's (RDDT +0.80%) stock has nearly doubled since suffering a severe dip in April, bringing the stock's 12-month gain to 25%. The recovery was driven by the company's strong growth in advertising revenue and daily active users. Those signs of strong ad revenue growth are also a big reason the stock is a compelling buy heading into 2026. Reddit is building a trusted brand that people are turning to for answers on various topics, which could benefit the stock over the long term. Image source: Getty Images. Strong competitive position Advertising drives over 90% of Reddit's total revenue. Ad revenue surged 74% year over year in the third quarter, driven by the strength in the number of ads shown on the platform and higher ad pricing. This signals tremendous demand from brands to reach 116 million daily active users on Reddit's platform. This growth also reflects how individuals are using Reddit. It's a platform that offers excellent value for shoppers seeking product reviews from other users. These high-purchase-intent users give Reddit a competitive edge, providing a key differentiation from other image-driven social media platforms like Instagram. The word "Reddit" is now one of the most searched terms on Google, indicating that people are specifically seeking out Reddit to gather others' opinions on a range of topics. This shows that Reddit is building a strong brand.Advertisement Reddit receives over 75 million weekly searches, a number that continues to grow along with its base. Reddit continues to invest in features that drive more engagement from its user base, while also generating high returns on investment for advertisers. ExpandNYSE: RDDTRedditToday's Change(0.80%) $1.85Current Price$233.19Key Data PointsMarket Cap$44BDay's Range$230.99 - $239.4452wk Range$79.75 - $282.95Volume5.9MAvg Vol5.4MGross Margin90.38% Why buy Reddit stock? By 2029, research from PwC shows that the global advertising market will exceed consumer spending by $300 billion. This reflects a 6% compound annual growth rate in advertising, compared to a 2% growth rate for consumer spending. Reddit is an excellent stock to ride this trend. Its conversation-driven platform is expected to continue capturing a growing share of the ad market, as demonstrated by its strong revenue growth. Its robust international expansion, where ad revenue grew 74% year over year last quarter, shows the platform gaining universal appeal. Investments in artificial intelligence will be a significant catalyst for the broader advertising market, enabling companies to achieve greater efficiency and returns on their expenditures. Reddit will need to sustain strong user growth to ward off competition in the social media landscape. However, Reddit's growing free cash flow, which totaled $509 million over the last year on $1.9 billion in revenue, will give the company the resources to make the necessary investments to improve the user experience, thereby growing its value for shareholders. With analysts projecting free cash flow to reach over $2.6 billion by 2029, representing a compound annual growth rate of 35%, the stock is likely to outperform the broader market.Read NextDec 13, 2025 •By John BallardGot $1,000? 1 Tech Stock to Buy and Hold for DecadesDec 9, 2025 •By Parkev Tatevosian, CFAIs Reddit Stock a Buying Opportunity for 2026?Dec 5, 2025 •By Will Healy2 Monster Stocks to Hold for the Next 5 YearsNov 28, 2025 •By John Ballard2 No-Brainer Growth Stocks to Buy Right NowOct 17, 2025 •By David Jagielski, CPAShould You Buy Reddit Stock Before Oct. 30?Oct 4, 2025 •By Parkev Tatevosian, CFAUnfortunate News for Reddit Stock InvestorsAbout the AuthorJohn Ballard has been a contributing writer at The Motley Fool since 2016, covering consumer goods and technology stocks. He holds a bachelor’s degree in business administration with a focus in real estate finance from the University of Arkansas at Little Rock.TMFRazorbackStocks MentionedRedditNYSE: RDDT$233.19 (+0.01%) $+1.85*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.Advertisement