- Reddit shares rose 13% pre-market ahead of S&P 500 inclusion on August 18
- The company replaces AvalonBay Communities in the S&P 500 index
- Reddit aims to expand its digital ad share against Meta and Alphabet
Shares of Reddit surged 13% during pre-market trade on Friday, August 14 as the popular social media platform will join the S&P 500 next week as part of an off-cycle change, S&P Dow Jones Indices.
Reddit shares advanced around 12.6% trading at by 5:24 a.m. ET.
The San Francisco- based company, which went public in March 2024, will be included to the benchmark before trading begins on August 18. It will replace AvalonBay Communities Inc., which will be acquired by S&P 500 member Equity Residential.
Reddit is continously investing in advertising technology, with the aim to grow its share of the digital ads business dominated by industry giants Meta Platforms Inc. and Alphabet Inc.'s Google, reports said.
In order to be included in S&P 500, companies must have a market capitalization of at least $22.7 billion and meet profitability, liquidity and share-float requirement, according to July guidelines.
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Following its IPO, Reddit's sales have grown, with the company posting its eighth consecutive quarter of more than 60% revenue growth. Even as investors hope on Reddit seeking more money-making opportunities amid artificial intelligence boom, shares were down 31% year-to-date through Thursday's close.
The platform has finalised deals worth hundreds of millions of dollars with OpenAI and Google, which have trained their AI models on the web forum's proprietary data, however investors wish for more agreements, Bloomberg reported.
Should You Buy, Sell Or Hold?
Out of 37 analysts tracked by Bloomberg, 25 recommended 'buy' on Reddit stock, 10 suggested 'hold', while 2 indicated 'sell'. Analysts from Jefferies, Deutsche Bank, Citi, Aurgus suggested 'buy' on Reddit shares. Rothschild indicated sell, while Goldman Sachs suggested neutral coverage on the stock.
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