What Happened?
Shares of online community and discussion platform Reddit (NYSE: RDDT) jumped 3.8% in the afternoon session after bullish analyst commentary highlighted the company's strong growth and favorable position in the artificial intelligence sector.
Several investment firms, including Piper Sandler, Needham & Co, and Jefferies, recently reiterated their "Buy" or equivalent ratings. The Jefferies team set a particularly high price target of $325, implying significant potential upside. Analysts pointed to a shift in how internet discovery was evolving, with users turning more to AI-generated answers. Reddit's content was frequently cited in these responses, making its data highly valuable. This created a potential new revenue opportunity through data licensing agreements that may not have been fully priced into the stock.
The positive outlook was supported by the company's strong financial performance, which included a 400% year-over-year increase in earnings per share in the most recent quarter and revenue growth of nearly 68%. The move also occurred as the broader market showed strong buying interest in AI-linked stocks.
After the initial pop the shares cooled down to $239.66, up 4.3% from previous close.
Is now the time to buy Reddit? Access our full analysis report here.
What Is The Market Telling Us
Reddit’s shares are extremely volatile and have had 59 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 15 days ago when the stock gained 3.4% on the news that the latest Consumer Price Index (CPI) report showed inflation cooling more than anticipated, fueling optimism for potential Federal Reserve interest rate cuts.
The November report indicated that annual inflation fell to 2.7%, significantly below economists' expectations of 3.1% and its lowest level since July. The Consumer Price Index, or CPI, is a key measure of inflation. This encouraging data was welcomed by investors, as sustained lower inflation could give the U.S. Federal Reserve more justification to lower interest rates in the coming year. Wall Street favors lower interest rates because they reduce borrowing costs for companies and can stimulate economic activity, making stocks more attractive. The positive news helped major indexes, including the S&P 500 and the tech-heavy Nasdaq, snap a four-day losing streak.
Investors who bought $1,000 worth of Reddit’s shares at the IPO in March 2024 would now be looking at an investment worth $4,751.
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