Rational Investing - Cameron Stewart, CFA 对 $RDDT 的判断变化

Have I ever looked at Reddit? No. Let's do this. This will be fun. Let's uh let's see this. I've never even looked at it. Um let's take a look. Um, so first things first, right? Let's just pull up the financials income statement. Revenue is growing nicely. 2.2 billion up. Wow. 70% 60%. Revenue is growing and it's is growing at an accelerating rate. That is that is really interesting. um gross profits a digital company but 90% gross profit. Okay, thank you for that R&D. So they made $2 billion last year fiscal year December. So we've got another three four months, excuse me, another six months before we get another result. They made $2 billion of gross profit R&D relatively. Well, that's growing. Yeah, they spent $780 million in R&D sing. This what you want. This is this is where management takes their they takes their cut. You want to see how much of that cut they're they're taking. So, five six years ago. Oop, sorry, that's that's SGNA. This is this is management here. So, six years ago, managers was running this business on $43 million of comp. Now, that comp is $230 million. That's what 8x growth rate in management comp in six years. That's very high. But then again, their business, the revenue went 10x up from 200 million to 2.2 billion. So, got to give credit where where it's due. That's phenomenal scaling. Go for it, guys. Take take the cash. Uh selling and marketing expense. So, now they're paying Hang on a second. Let's see what that what that looks like. Uh pull up a calculator and let's just take a look and see. So, they're paid last year. selling expense was here right here 500 million 500 divided by 22000 they spent 22% of their revenue on marketing we'll [clears throat] go back four years 4 years uh it was 222 divided by 666 great number all right uh not great number was a weird number uh 33% so they're spending less as a percentage of revenue revenue on sales and marketing expense. Even though this number is going up, it's less of a percent of revenue. Okay, I buy that. And they made [clears throat] money. They made money for the first time. They were unable to make money the last, I guess, as far back as this data goes, they finally made money. 442 million. It's a decent margin. What is that? 442 / 2200 20%. 20% operating income margin that's actually be higher than that. Even that's 450 uh 45720%. I guess they have little depreciation. Interesting. Kind of neat company. I don't know how defensible though it is. like how do you think about their positioning in the market, right? What what else can they do? Is it is it add revenue? How do they how do they grow their how are they growing?

So right growth drivers 97% of revenue is advertising. No no no no um no shocker there. Ad revenue 625 million last in Q1 of 26 up 74% driven both by both by impression growth and price improvement. healthier combination of volume growth alone since it signal advertiser demand is outpacing inventory rather than Reddit discounting to fill it out. So more and more advertisers are going to go to red. You know it's interesting we you know we we in our business are looking at always ways to find new customers. People think of Facebook automatically uh you know Tik Tok, Instagram. Well, Instagram is Facebook. Um and Google, some people are going to LinkedIn, but advertising in Reddit is actually interesting idea. Uh X, very few people look at X, but I'm going to look at Reddit on my RO business. That's not a bad idea. And try to figure out what's cheaper. If if everybody's like this comment here is really interesting on on demand within the business itself. So it's driven by both impression growth and price improvement. A healthier combination than volume growth alone since it signals advertisers demand is outpacing inventory. So inventory in this instance would be like room to show ads to Reddit consumers. And so this is saying they're getting more people going into and giving Reddit cash to show ads than they have basically space on the network to show. So if you're if you're scrolling reading ads, you can't have an ad every single time you scroll. They have to give an ad every three times you scroll or every five times you scroll. Like that ratio needs to be something so you're getting some decent content, not just looking at ads all the time. So that's the inventory that they're quoting here is their ability to give you an ad. Say every five images you get an ad. Um, interesting Shopify integration. Oh, that's it. Pushes Reddit into performance lowerfunnel advertising putting it into a direct competition with Meta and Guru. A tougher, more mature battlefield as awareness categories. Reddit built easier business. Reddit Max internal AI. That's interesting. I love the idea of linking Shopify with Reddit. What that's going to do from a digital perspective if you can if you can.

So the the problem with digital advertising is attribution. you. It's very difficult for a business to um to know where their advertising money is being spent and is that money being spent effectively. I get a new customer that comes in the door, that's great, but where did that customer come from? If I don't have a really good chain that says, "Oh, they clicked on a Facebook ad or they clicked on a Google ad or maybe they clicked on several. Which one of those do you attribute the lead to?" It's very difficult. Or maybe they come in, you have no idea. There was no tracking. You can't tell. So customer attribution is a huge battle within corporate America to figure out where do these customers come because it drives where you spend your ad money, who you give your ad money to.

And if customers can be gained cheaply through Reddit, Reddit's going to see receive more and more share of companies marketing budgets to find new customers and maybe the competition in Reddit for eyeballs is less than than than Meta.

this is this is a nice nice business what was the overall it's trading negative was it negative earnings negative in the quarter revenue. So quarterly data revenue continues to grow year-over-year. That's fine. 90 plus% profit margin. Operating income's profitable every quarter. I don't understand the problem. So Ebida is good. This this looks like it looks like a good business. I don't understand why it's it's showing me EBITDA enterprise value EBITDA is uh daily it's kind of off the chart I don't know I it looks it looks like a very interesting business to me is answer the question sorry I kind of went down a rabbit hole um looks like a very interesting business and if they can get data that shows um that they can give c give give businesses customers and an affordable rate, the customers, the businesses will give Reddit more and more of their advertising budget.