Reddit (RDDT 7.02%) just went public in the most anticipated initial public offering (IPO) of 2024 so far, creating a new option for investors who want social media exposure in their portfolio. While there's a lot to like about Reddit, fellow social media stock Pinterest (PINS 4.04%) looks like an attractive investment as well and could be more appropriate for certain investors.
With that in mind, here's a rundown of the key metrics and stats investors should know about both of these. Social media is an exciting industry with lots of long-tailed growth potential, but as you'll see, these are two very different investment opportunities.
Reddit: Here's what to know about this newly public platform
As mentioned, Reddit just went public, so it hasn't released any quarterly earnings reports yet, but there is quite a bit of information we do know, thanks to its pre-IPO filings with the Securities and Exchange Commission (SEC).
At the end of 2023, Reddit had 267 million weekly active users (73 million daily actives). The platform averages about 1.2 million posts and 7.5 million comments every day and is one of the top 10 most visited U.S. websites.
From this user base, Reddit generated $804 million in revenue in 2023, which was 21% year-over-year growth. And speaking of growth, since that has been Reddit's primary focus, the business isn't profitable yet, with a net loss and adjusted EBITDA loss of $91 million and $69 million, respectively, last year. Most of Reddit's revenue comes from advertising, just like other social media platforms, but the company sees other opportunities for future growth, including e-commerce and the sale of digital goods within Reddit communities.
Pinterest has turned a corner and is a profitable business
After a lull in user growth, Pinterest has pivoted to a more e-commerce focused strategy and its recent results have been impressive. The platform has 498 million monthly active users (unfortunately Pinterest doesn't break out daily or weekly users), which is 11% more than a year ago. Revenue grew 12% year over year, fueled by especially strong monetization growth of the platform's non-U.S. users.
Furthermore, Pinterest is highly profitable, with $684 million in adjusted EBITDA over the past four quarters and over $200 million in generally accepted accounting principles (GAAP) net income in the fourth quarter. The analyst consensus calls for about $917 million in net income for 2024.
The bottom line: Which is best for you?
Reddit is clearly not a cheap stock by any metric. It isn't profitable, and trades for about 9.4 times trailing-12-month sales. However, if the company can keep its growth momentum going (or even accelerate it now that it's public), it's important to keep in mind that the business has an excellent 86% gross margin and could be a long-term winner as monetization continues to evolve.
Pinterest, on the other hand, has a market cap that is roughly triple that of Reddit, but for good reason. Not only is the user base larger, but Pinterest is further along when it comes to monetization. In fact, Pinterest's revenue in the fourth quarter was more than Reddit's full-year 2023 figure. It trades for a comparable price-to-sales multiple (7.5x), but is also a profitable business, trading for about 26 times forward earnings.
If you're looking to get in on an earlier-stage growth opportunity, Reddit could be worth a closer look. But Pinterest is still growing at a double-digit pace and its profitability is accelerating. Both could be long-term winners if they can execute on their respective growth strategies, but Pinterest is one of my largest stock investments and I have no plans to sell any of it to buy shares of Reddit. Plus, with the stock already trading for about 50% more than its IPO price, it might be a smart idea to let the dust settle if you're interested in adding Reddit to your portfolio.
