Reddit Stock Trades 42% Below Its 52-Week High: Buy, Sell or Hold?

Reddit RDDT shares closed at $133.84 on Tuesday, 41.9% below the 52-week high of $230.41 it hit on Feb. 10, 2025. Reddit shares have dropped 18.1% year to date (YTD), while the Zacks Internet - Software industry and Zacks Computer and Technology sector gained 10.7% and 1.2%, respectively. 

Reddit shares have been suffering from a challenging macroeconomic condition and higher tariffs, which negatively impact discretionary spending, a trend that could weigh on digital ad budgets. Intensifying competition in the social networking space from the likes of Snap SNAP and Nextdoor KIND has added pressure to RDDT’s stock performance.

Reddit has outperformed its closest peers, Snap and Nextdoor, YTD. Shares of Snap and Nextdoor have declined 24% and 31.6%, respectively, over the same time frame.

RDDT Stock’s Performance

However, Reddit’s impressive first-quarter 2025 results have helped the stock recover somewhat. Since May 1, RDDT shares have increased 12.7%, outperforming KIND and SNAP’s returns of 6.6% and 4.5%, respectively.

Reddit reported non-GAAP earnings of 13 cents per share for the first quarter of 2025, beating the Zacks Consensus Estimate of 2 cents per share. Revenues of $392.36 million increased 61% year over year and surpassed the consensus mark by 5.45%.

Most importantly, daily and weekly active uniques both rose 31% year over year, reflecting continued user engagement momentum and drawing further advertiser attention. Advertising revenues grew 61% year over year to $358.6 million, reinforcing Reddit’s growing appeal among performance advertisers.

Reddit Shares Trading at a Premium

Reddit shares are trading at a premium, as suggested by the Value Score of F.

In terms of forward 12-month P/S, RDDT stock is trading at 11.8X compared with the Zacks  Internet - Software industry’s 5.57X. The stock is expensive than competitors, including Snap and Nextdoor. 

Shares of Snap and Nextdoor are currently trading at P/S ratios of 2.24X and 2.42X, respectively.

RDDT’s P/S Ratio (F12M)

Although Reddit’s strong results and growing user engagement are noteworthy, are the shares worth buying at currently elevated prices? Let’s dig deep to find out.

Earnings Estimate Revision Trend Positive for RDDT

The Zacks Consensus Estimate for earnings is pegged at 19 cents per share, up 72.7% over the past 60 days, suggesting a significant improvement from the year-ago quarter’s loss of 6 cents per share. 

Reddit Inc. Price and Consensus

Reddit Inc. price-consensus-chart | Reddit Inc. Quote

For the second quarter of 2025, Reddit anticipates revenues between $410 million and $430 million. The Zacks Consensus Estimate for the same is pegged at $426.3 million, suggesting 51.61% growth over the year-ago quarter.

RDDT’s Expanding Portfolio and Key Partnerships to Aid Prospects

Reddit continues to strengthen its advertising platform with AI-powered tools that help brands connect more effectively with its communities. Its product suite of - Dynamic Product Ads, Reddit Pro and the Headline Generator, supports more personalized campaigns and helps deliver better outcomes for advertisers.

In May 2025, Reddit upgraded Reddit Pro with easier onboarding and new features that highlight relevant community conversations. These updates help businesses build trust and engage more naturally with users. Dynamic Product Ads, now widely available, let advertisers run targeted promotions using improved machine learning and larger product catalogs.

Reddit expanded its offerings with the launch of Reddit Community Intelligence at Cannes Lions 2025. The new solution transforms real-time community conversations across categories like tech, gaming and entertainment into actionable insights, enabling marketers to better understand user sentiment and craft more monetizable campaigns.

Reddit’s strong product portfolio plays a key role in attracting leading technology players. Its collaborations with Alphabet GOOGL, Microsoft and Integral Ad Science are helping scale platform innovation and measurement tools. Alphabet expanded its partnership with Reddit by integrating Reddit’s Data API into Google Search, improving content discovery and enhancing the visibility of Reddit discussions in search results.

Here’s Why You Should Hold RDDT Stock

Reddit’s growing product suite, building user engagement and strong partner ecosystem with the likes of Alphabet, Microsoft and Integral Ad Science offer long-term promise. 

Reddit shares are trading above the 50-day moving average, indicating a bullish trend.

RDDT Shares Trade Above 50-Day SMA

However, given RDDT’s premium valuations, intensifying competition and broader market uncertainties, near-term gains may be limited.

Reddit currently carries a Zacks Rank #3 (Hold), suggesting that investors should wait for a more favorable point to start accumulating the stock. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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