Wall Street day traders found themselves shocked and confused last week when Reddit’s stock price climbed to heights of 58 percent, surpassing the expectations of even the most liberal investors on r/WallStreetBets. The social media site, which is primarily used for sharing opinions, discussing niche topics and delivering daily news to millions of user-generated in-groups, reported $348.4 million in Q3 revenue according to data on Yahoo Finance. While these sky-high figures would be a bit surprising to most financial analysts, they were especially shocking to Wall Street insiders, who were reportedly planning to short the RDDT stock based on their expectation that the site would lose money during the most recent earnings report.
In order to understand why and how the Reddit stock was able to surpass expectations, we’ll have to take a brief look at what’s changed in the site’s business model in recent months, watch similar stocks such as META and NVDA, and study the industry trends that brought us here. With no further preamble, let’s dive right in, and see if we can understand what happened with Reddit’s stock, as well as how to better predict these trends moving forward.
What Is Reddit’s Business Model?
As mentioned above, Reddit is primarily a social media and entertainment site, offering a wide array of photos, videos, text posts and discussion threads. The site/app is completely free to use, and a vast majority of its base never pay a dime to spend hours doomscrolling through the latest news and updates on their home page. Still, Reddit is a multi-million dollar industry which brings in hundreds of millions each quarter through three primary sources. For starters, the site sells ad space to numerous third-party outlets, by offering promoted posts, branded content and other paid partnerships. There is also a paid membership version of Reddit which offers additional access to special features throughout the app, including a number of cute award icons which can be purchased and gifted to other users.
While ads and paid memberships bring in millions for Reddit, the site’s stock price certainly would not have climbed nearly 60 percent on these two earnings capabilities alone. Reddit’s number one source of income is through IPO funding, which has gone over 10 rounds since the company first went public back in March of 2024. At that time, the site entered the New York Stock Exchange, and quickly debuted at $34 per share, according to CNBC. Another key factor in Reddit’s success is the company’s willingness to embrace the use of AI, which has become a major hot-button issue in the world of tech. Site owners have previously detailed their plans to allow AI models to train based on human-generated content throughout the site, giving massive backlogs of information to Silicon Valley’s hottest start-ups.
How Did Reddit’s Stock Grow So Much?
There are numerous factors which tie-in to Reddit’s recent growth in market cap, which reportedly saw a net income of nearly $30 million against $8 million in projected losses. While the site’s CEO attributed this positive uptick to a growing user base, it seems more likely that the site was a beneficiary of Google’s latest series of Core updates. If you’ve ever done any work in search engine optimization, you likely already know that Google and similar search engines have been prioritizing Reddit threads over scholarly articles and other primary sources for some time now. Even if you’ve never been a Reddit user, you may have experienced this while Google searching basic questions regarding technology, entertainment and other personal topics.
Reddit employees have also made note of this change, and have taken full advantage by tweaking their SEO stats to appeal to top-filtered results in Google’s algorithm. Since the site has had such success reaching the front page – and even top positions in many searches, Reddit has brought in many new users, and a higher bandwidth for showing advertisements.
What Is RDDT Listed At Today?
While the market is known to fluctuate quite rapidly, Reddit has routinely seen massive gains since entering the NYSE. According to Investor’s Business Daily, the stock is currently ranked number one in the Internet-Content Group, even when stacked up against industry giants such as META, NVDA and more. The site’s massive 58 percent leap saw it growing from a single-share price of $82.97 to $123.18 from October 29 to October 31, marking the stock’s all-time high. At the time of this writing, Reddit stock has somewhat equalized back down to a rate of $112.50 according to Yahoo Finance, though these figures are subject to change as we enter into the late fall/early winter.
Any way you slice it, it looks like this massive jump was not an anomaly for Reddit, and is in-fact the site’s new normal. Investors are already scrambling to look at the stock’s long-term projections and after-hours rates, in an attempt to lock-in shares before another massive leap. While analysts are dodgy about when such a leap could occur, all signs point to RDDT staying above the $100 per-share line for the foreseeable future.
