Reddit (RDDT) stock received a new “Outperform” rating and $250 price target from Wedbush’s analyst Ygal Arounian on Thursday, with the firm naming it a top mid-cap internet pick based on community engagement strength and AI monetization potential.
Despite the bullish catalyst, Reddit shares tanked about 4% on July 16 as a broader tech sector de-risking overshadowed the positive initiation. Year to date, the stock is down nearly 20%.
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www.barchart.comWhy Did Reddit Stock Sell Off Today?
The selloff was driven primarily by TSMC’s (TSM) quarterly results, which confirmed robust AI demand but simultaneously raised capital expenditure outlook to $60-$64 billion, signaling that scaling AI infrastructure will be extraordinarily expensive.
This capex reset triggered a multiple de-rating across AI stocks, with investors questioning whether downstream software and data monetization firms can ultimately justify the hardware investments being made upstream.
Reddit, having rallied recently as a high-multiple AI name due to its data-licensing arrangements, proved particularly vulnerable to this valuation debate.
Other Stocks Wedbush Likes for 2026
Wedbush’s broader internet sector initiation positioned Alphabet (GOOG) (GOOGL), Uber (UBER), Reddit, and Xometry (XMTR) as top picks across different market-cap tiers, with the analyst calling AI the single most impactful swing factor shaping the sector’s outlook.
The investment firm stated that companies with the strongest combination of technology, product, and distribution are best positioned as AI reshapes the internet industry.
Its $250 price target on RDDT stock signals more than 30% upside from here, reflecting substantial conviction in the company’s trajectory.
Why Wedbush Is Bullish on Reddit
The fundamental investment thesis for Reddit shares centers on its data licensing business, which currently generates $130-$200 million annually through deals with Google (roughly $60 million per year) and OpenAI (roughly $70 million per year).
CEO Steve Huffman has been pushing to convert the 2027 renewals of these flagship agreements from flat fees to usage-based, dynamic pricing that would compensate Reddit proportionally as its data becomes more integral to AI-generated answers.
Wells Fargo has estimated that renegotiated terms could lift combined licensing revenue toward $550 million, representing a potential tripling of the current run rate.
Reddit's recent operational moves reinforce its data moat thesis. The company has deployed LLM-based spam detection systems that catch approximately 25,000 net-new spammy posts daily, block roughly 23 million spam views per day, and revoke nearly 2 million inauthentic votes daily, cutting user spam exposure by about 20% over three months.
This effort to combat generative engine optimization directly protects the authenticity and value of Reddit's human-generated corpus, which is precisely what AI labs are paying to license.
Is RDDT Attractive Priced in 2026?
Reddit stock’s year-to-date decline and its position more than 30% below the 52-week high of $270 provide context for the Wedbush initiation as a value-oriented call rather than a momentum play.
Trading at a price-to-earnings (P/E) ratio of about 22x based on 2027 analyst estimates, Reddit is characterized by some analysts as inexpensive relative to its growth rate, having delivered seven consecutive quarters of revenue growth exceeding 60%, with the most recent quarter showing 69% year-over-year expansion to $663 million.
The company continues to benefit from new ad formats, increased ad loads, and its AI-powered advertising platform Reddit Max, which helps advertisers reduce costs per action while increasing conversions.
How Wall Street Recommends Playing Reddit
Looking ahead, the key catalysts for RDDT stock will be the 2027 data licensing renewals, upcoming quarterly earnings, and the broader market's willingness to assign premium valuations to AI-adjacent business models amid escalating infrastructure costs.
Geopolitical tensions and active profit-taking among momentum traders suggest near-term volatility will persist, but the Wedbush initiation adds institutional credibility to the bull case that Reddit's unique position as a trusted human data source gives it significant pricing power in an AI economy increasingly dependent on high-quality training data.
The consensus rating on Reddit stock currently sits at “Moderate Buy,” with the mean price target of about $222 indicating significant further upside from current levels.
www.barchart.comThis article was created with the support of automated content tools from our partners at Sigma.AI. Together, our financial data and AI solutions help us to deliver more informed market headline analysis to readers faster than ever.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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