Reddit (RDDT) stock jumped more than 12% in extended trading on Thursday after S&P Dow Jones Indices announced that the social media company will join the S&P 500 index (SPX). The inclusion will take effect before trading begins on August 18, giving Reddit a major boost in visibility among institutional investors. Reddit will replace Avalon Bay Communities (AVB) due to its planned merger with Equity Residential (EQR), expected to close on August 17.
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200% short exposure to META with METQThe move comes after months of speculation that Reddit could be added to the benchmark. The company became eligible after meeting key requirements, such as profitability and market capitalization criteria. Its addition means index-tracking funds will need to buy Reddit shares, potentially creating additional demand for the stock.
Why Is S&P 500 Inclusion Important?
Joining the S&P 500 can be a major catalyst for stocks because billions of dollars are invested in funds that track the index. Inclusion in the SPX can create demand from index-tracking funds, potentially putting significant buying pressure on the stock around the inclusion date. Reddit could also benefit from increased exposure to institutional investors and analysts.
The company has already attracted investor attention following its strong growth in advertising and user engagement, and S&P 500 membership could further raise its profile on Wall Street.
Reddit and Meta (META) are the only two major social media platforms in the SPX. Pinterest (PINS) and Snap (SNAP) are still too small by market value to qualify, while Twitter left the index after Elon Musk acquired the company and renamed it X.
Reddit’s Financial Performance
In Q2 FY26, Reddit’s revenue jumped 61% year-over-year to $804.90 million, above analysts’ expectations of $730 million. EPS surged 178% year-over-year to $1.25, beating estimates of $0.95. Moreover, Reddit’s daily active uniques (DAUq) rose 18% year-over-year to 130.3 million, compared with 126.8 million in Q1.
Nonetheless, analysts remain cautious as Reddit’s user growth has slowed in recent quarters, while the renewal of its data-licensing deals with Google (GOOGL) and OpenAI remains uncertain.
Should I Buy or Sell Reddit Stock?
Analysts remain cautiously optimistic about Reddit’s long-term outlook. On TipRanks, RDDT has a Moderate Buy consensus rating based on 14 Buys and nine Hold ratings. The average Reddit price target of $218.32 implies 38.1% upside potential from current levels. Year-to-date, RDDT shares have dropped 31.2%.
