Is it worth buying Reddit shares? A look at the data

Everyone is talking about Reddit's (RDDT) IPO, with the company seeing significant share price appreciation upon launch, despite the $34 valuation being the high end of the company's range.
Currently, the company is valued at around $8 billion, which highlights strong growth expectations.
The question everyone is asking right now is: are these growth expectations sensible? The answer to this question is not obvious and requires an accurate evaluation of the company's business.
Is Reddit solid or just speculation? Anyone who has been online for a few years has probably already heard of Reddit, as it has been an active social network for almost 20 years.
Society has a particular fundamental structure and deserves to be explored in depth.
The platform is less populated than more common social networks such as Facebook, but the surge in visitors in recent years has once again made Reddit a portal worthy of further study.
Daily active users are constantly increasing and compared to the last quarter of 2022, the closing quarter of 2023, there is a 30% increase in users, although approximately 50% of users come from the United States.
As the company's core business is linked to advertising, Reddit's revenues increased significantly in 2023, with growth of approximately 20%.
Despite this, the company still fails to generate profit, and this is one of the most difficult factors for the investing public to digest.
Exploring further between the lines of the balance sheet, there is a cost item that has a particularly impact on company expenses, but which raises the spirits of investors and gives hope for the future: research and development.
Why Did Reddit's IPO Do So Well? Given the financial situation of Reddit, the only reason that can explain such a strong interest on the part of investors is to be found in the growth prospects, as well as a small dose of speculation, which systematically characterizes the stocks on the day of the IPO, especially on highly talked about companies like Reddit.
What pushes expectations high? In addition to the question of research and development, which in itself remains a mere accounting data, what supports the premium on Reddit shares is also in this case the impact that artificial intelligence could have on a social network company like this one, which has been active online for over 20 years, holding a significant amount of data.
Not surprisingly, the company, with over one billion posts and over 16 billion comments through December 31, 2023 and an average of 1.2 million posts per day and 7.5 million comments per day in 2023, would represent a very important source of data.
This factor was precisely highlighted by the latest prospectus filed by Reddit itself, citing: «Our contents are particularly important for artificial intelligence ('AI'): they are a fundamental part of many of the main large language models (' LLM') who have been trained."