April 12 (Reuters) - Top Wall Street brokerages, whose investment banking units helped Reddit prepare for its public issue, started coverage of the social media company with doubts over its user growth, while staying bullish on ad revenue and its use of artificial intelligence.

J.P. Morgan began with a "neutral" rating and a price target of $47, while Morgan Stanley had "equal-weight" rating and a $45 price target.

Reddit shares were trading at $42.80 before the bell, below the debut price of $47 last month.

"DAUq (daily active unique users) growth has accelerated in recent quarters and there is meaningful headroom for growth, but for now Reddit's base of 73 million users is relatively sub-scale," J.P.Morgan analysts led by Doug Anmuth wrote in a note.

They estimated DAUq to hit 109 million users by 2026, but these figures still lagged peers like Meta Platforms' Facebook and Elon Musk's X by a wide margin.

"Reddit needs to prove it can meaningfully scale over time," they said.

The social media company relies on advertising for a big share of its revenue, even though it touted AI in its initial public offering (IPO) as an area of growth.

Morgan Stanley, Goldman Sachs, JPMorgan and Bank of America were among over a dozen underwriters for the Reddit IPO, all of whom had to wait till mid April to start coverage as required by industry practice.

"Valuation leaves us on sidelines as we wait for evidence of outsized user growth and faster execution," said Morgan Stanley.

With a $50 price target, Piper Sandler and Roth MKM were the most bullish on the stock with "overweight" and "buy" ratings, respectively.

While Piper termed Reddit an "iconic internet asset", Roth said the company is regarded as the "front page of the Internet" and deserved a premium valuation.

"Reddit's large, unique, and fresh corpus of user-generated text content is now increasingly valuable to AI models," Roth analysts said.

On the use of artificial intelligence, J.P.Morgan said, "Reddit is early in ads monetization and the company's corpus of historical information could represent a compelling source for LLM (large language model) training."

Reddit's popularity rose to new heights during the "meme-stock" saga of 2021 in which a group of retail investors collaborated on its forum "wallstreetbets" to buy shares of highly shorted companies like GameStop.

Earlier this month, brokerages Baird and Bernstein had initiated coverage on Reddit with concerns over the company turning a profit. (Reporting by Siddarth S in Bengaluru; Editing by Vijay Kishore)