A $3.68 Billion Infusion — And 400% Earnings Growth — Put Reddit In Focus

In the latest list of new buys by the best mutual funds, social media leader Reddit (RDDT) saw capital inflows of $3.68 billion over the past several months. Fueled by double-digit sales growth and explosive earnings, that demand has lifted Reddit stock onto the IBD 50 and Investor’s Business Daily’s Leaderboard watchlist.

Over the last three quarters, the company has posted average earnings growth of 451%, including a 400% rise to 80 cents per share in the third quarter. During the same period, revenue gains have ranged from 61% to 78%. In the third quarter, Reddit generated sales growth of 68% to just under $585 million.

Savvy Money Managers Socialize With Reddit

Based in San Francisco, Reddit bills itself as a community of communities. With over 100,000 active communities and more than 110 million daily active unique visitors, the platform lets users submit, vote, and comment on the topics of interest.

Reddit joined Google-parent Alphabet (GOOGL) on this month’s screen of new buys by the top money managers. Both stocks hail from the Internet-Content group, which ranks No. 29 out of the 197 industries IBD tracks.

In another sign of demand, Reddit stock has seen six quarters of rising fund ownership. From the fourth quarter of 2024 through the third quarter of this year, the number of funds with a position in the social media company has spiked to 1,324 from 581.

When Reddit reports fourth-quarter performance in mid-February, analysts forecast 68% sales growth to more than $665 million. Wall Street expects 158% earnings growth to 93 cents a share. For the full year, earnings are expected to rise 175% to $2.31 a share.

Rocky Reddit Stock Rebounds, May Get A Handle On This Buy Point

Since going public in March 2024, Reddit stock has traveled a powerful, but volatile path. After soaring to a then-record high in February, shares took a nosedive, sinking below their 50-day and 200-day moving averages. But Reddit managed to rebound to an all-time high in September before turning tail once more.

Shares continue to work on a new cup pattern. The current buy point is 282.95, but Reddit may form a handle to offer an earlier entry at 240.18. As the Nasdaq retreated Friday, shares of Reddit fell nearly 4% but the base remains intact.

In November, the stock bounced back above its 50-day line. And flashing another telltale clue indicating improving technical strength, the shorter-term 21-day exponential moving average has just moved back above the longer-term 50-day benchmark.

Meanwhile, industry peer Alphabet continues its pullback from pulled off the all-time high it hit last month, but held support at its 21-day line.

Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.

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