What Happened?
Shares of online community and discussion platform Reddit (NYSE:RDDT) fell 6.5% in the morning session after the major indices tumbled (Nasdaq down 1.9%, S&P 500 down 1.7%), marking a volatile ending to an otherwise good year for stocks. This marks the second straight day of broad-based declines with similar downturns (Nasdaq down 1.5%, S&P 500 down 1.1%) recorded on the previous trading day, Friday, December 27, 2024. This suggests that perhaps investors are locking in gains and positioning portfolios for 2025.
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What The Market Is Telling Us
Reddit’s shares are extremely volatile and have had 50 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 21 days ago when the stock gained 11.1% on the news that Morgan Stanley analyst Brian Nowak upgraded the stock's rating from Equal Weight (Hold) to Overweight (Buy), citing the potential for platform engagement and the advertising pipeline to accelerate growth. The analyst is projecting U.S. ad revenue growth of approximately 35% from 2024 to 2027, which would outpace peers by 2x-6x. Nowak pointed to specific growth drivers, including rapid improvements in engagement features, advanced ad tools, and machine learning innovations. These factors underpin his $200 price target, representing a potential 23% gain, and a bullish scenario of $300, implying an 85% upside.
Reddit is up 232% since the beginning of the year, and at $167.19 per share, it is trading close to its 52-week high of $178.10 from December 2024. Investors who bought $1,000 worth of Reddit’s shares at the IPO in March 2024 would now be looking at an investment worth $3,316.
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