Why Reddit Stock Skyrocketed in Its IPO Today
Reddit (NYSE: RDDT) stock saw explosive gains in its first day of trading. The company's share price closed out the daily session up 43%, according to data from S&P Global Market Intelligence.
Reddit had its initial public offering (IPO) and began trading on the stock market this morning, and shot higher out of the gate. The company had priced its stock at $34 per share, but the stock actually began trading at roughly $47 per share and reached as high as $57.80 earlier in today's session. At its peak, the company's stock had been up 70% from its IPO price.
Reddit stock stuns in its public debut
Reddit stock's much-anticipated public debut has finally arrived, and it's been a big success for the company. The social-networking site raised roughly $519 million by selling shares, and gains for the stock upon hitting the market have pushed the company's valuation up to roughly $7.6 billion. While that's still below the approximately $10 billion private valuation the business garnered a few years ago, there's clearly appetite for the stock -- and upcoming moves from the company could help to send its share price higher.
What comes next for Reddit?
Last year, Reddit's revenue increased 20% annually to reach $804 million. Meanwhile, the business posted a net loss of $90.8 million -- down from a loss of $158.6 million in 2022.
Like many other social-media companies, Reddit's core business revolves around advertising. But the company is looking to expand other monetization channels. As stated in the S-1 filing that the company made ahead of its public debut, Reddit is looking to lean more heavily on turning its network into a development and content-creation platform.
The company also highlighted its opportunities in artificial intelligence (AI) and data licensing. Check out this quote from the company's S-1 filing:
As the world becomes increasingly data-driven, we offer solutions that are human- and experience-focused. We expect our data advantage and intellectual property to continue to be a key element in the training of future LLMs.
Investors probably won't have to wait long for the company's data-licensing initiatives to begin bearing fruit. The company says that it has entered into licensing contracts worth $203 million over the next two-to-three years, and it expects to record at least $66.4 million of that revenue this year.
Reddit has a large and highly engaged user base, but it's struggled with monetization in the past. If the company can leverage data licensing as a major new revenue source, shares could surge above current levels.
Should you invest $1,000 in Reddit right now?
Before you buy stock in Reddit, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Reddit wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of March 21, 2024
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
