Reddit (NYSE:RDDT) shares debuted with bumper gains yesterday, rising as high as $57+ before closing nearly 48% higher for the day. The surge put Reddit’s market capitalization at ~$9.5 billion.
The rousing debut for the social media company also raises hopes of strong listings for the IPO market this year. Reddit had priced its IPO at $34 per share, and shares of the company opened at $47 per share.
The Good, the Bad and the Ugly
Over the years, Reddit has evolved into a community of communities, attracting over 73 million daily active unique visitors. Users across its nearly 100,000 communities engage in discussions ranging from gardening and stocks to games and aliens. While its revenue has been increasing, the company has yet to churn out profits, though it has made progress in reducing its net loss from $159 million in 2022 to $91 million in 2023.
However, Reddit’s journey towards a public listing has been challenging. Founded nearly two decades ago, the company was valued at approximately $10 billion in a 2021 funding round. However, its IPO price dragged this valuation down to roughly $6.4 billion.
Notable Investors Benefit
Many investors with larger holdings benefited from Reddit’s 48% stock price jump at listing. Sam Altman, from OpenAI, is among the investors in Reddit. According to the Wall Street Journal, Altman’s Reddit holdings were valued at about $613 million at Reddit’s closing price yesterday. However, like other insiders, Altman is prohibited from selling shares for six months.
Furthermore, Reddit CEO Steve Huffman’s stake in the company is estimated at around $210 million.
What Is the Best Social Media Stock to Buy?
For now, Reddit’s negative bottom line puts the stock in league with other loss-making social media names such as Spotify (NYSE:SPOT), Pinterest (NYSE:PINS), and Snap (NYSE:SNAP). Comparing these three stocks Meta Platforms (NASDAQ:META) using the TipRanks Comparison Tool, we observe that out of the social media stocks, Meta is the only one trading at positive price-to-earnings multiple of 33.99.
At present, Wall Street sees a nearly 4.1% potential upside in Meta, based on a Strong Buy consensus rating and an average META price target of $528.80.
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