This Social Media Stock Has Struggled This Year. Why One Analyst Says It's Time to Buy

Why It Matters

If Reddit successfully lifts AI‑licensing fees and resolves its Anthropic lawsuit, the stock could deliver significant upside, highlighting the broader monetization potential of user‑generated content in the AI era.

Key Takeaways

• D.A. Davidson assigns Reddit a buy rating with $200 target.
• Analyst expects 15‑30% higher rates on LLM licensing deals.
• Potential Anthropic lawsuit settlement could boost Reddit's earnings.
• Stock down ~28% YTD, offering entry point for investors.
• Growth catalysts projected for second half of 2026 and 2027.

Pulse Analysis

Reddit’s platform, built around community‑driven discussions, has long lagged behind rivals like Meta and Twitter in extracting revenue from its massive user base. While its ad stack has grown, the company still relies heavily on a handful of high‑margin licensing deals with AI firms. Analysts see a clear path to bridge that gap by expanding its data‑access agreements, a strategy that mirrors moves by other content aggregators seeking to monetize the surge in generative‑AI demand.

The rise of large‑language models has turned user‑generated content into a valuable training asset. Reddit’s existing contracts with Google and OpenAI already generate steady cash flow, but Swanson’s projection of 15‑30% fee increases suggests a sizable upside if the platform can leverage its unique data trove. Industry peers are renegotiating similar deals, and the broader market is rewarding companies that can turn data into recurring licensing revenue, positioning Reddit as a potential beneficiary of this trend.

Legal exposure remains a wildcard, as the pending lawsuit against Anthropic over unlicensed data scraping could either drain resources or, if settled favorably, provide a financial boost. Coupled with a 28% YTD price decline, the stock offers a discount relative to its projected earnings trajectory. Investors weighing macro‑sensitivity against the anticipated 2H‑2026 and 2027 catalysts may find Reddit’s valuation compelling, especially if the company can lock in higher AI‑licensing rates and resolve its litigation swiftly.