Reddit (RDDT) stock dropped about 8% on Monday as investors locked in gains following the stock’s strong 12.6% rally on Friday. The drop comes just ahead of Reddit officially joining the S&P 500 Index (SPX) tomorrow, a key milestone that brings fresh index‑fund demand but can also spark short‑term swings as traders adjust their positions.
Reddit is replacing AvalonBay Communities (AVB) and will become only the second pure-play social media stock in the S&P 500 alongside Meta Platforms (META).
Overall, the selloff is largely driven by profit-taking rather than a shift in fundamentals. Reddit has gained about 12% in the past six months, on rising engagement trends and optimism about new AI‑driven traffic sources.
Analyst Sees Upside in Reddit’s User Trends
Despite the pullback, Raymond James analyst Josh Beck raised his price target on Reddit stock to $205 (24.6% upside) from $200 while keeping a Buy rating. The five-star analyst said his team built a detailed “tree analysis” to break down Reddit’s daily active users (DAUs) across direct traffic and Google (GOOGL)-driven traffic, including navigational queries and other search types.
He also examined key swing factors such as Google’s AI Overviews (AIOs), changes to Reddit’s Feed, and the impact of emerging AI chatbots.
Beck noted that RDDT remains below the Street on U.S. DAUs because visibility into AIO headwinds easing is still limited. He pointed to layout and click‑through‑rate issues as ongoing challenges. However, the analyst sees a strong upside from improvements to Reddit’s recommendation systems, which could lift weekly active user (WAU) to DAU conversion. He also views AI chatbot traffic as a future tailwind that could help shift the currently cautious DAU narrative.
The analyst also said that the risk‑reward remains attractive as Reddit continues to scale its platform and benefit from new AI‑driven traffic sources.
It must be noted that Beck ranks 550 out of more than 12,474 analysts tracked by TipRanks. He has an overall success rate of 56% on RDDT stock, with an average return per rating of 14.3% over a one-year timeframe.
Is Reddit a Good Stock to Buy?
Turning to Wall Street, RDDT stock has a Moderate Buy consensus rating on TipRanks based on 15 Buys and nine Holds. The average Reddit stock price target of $217.74 indicates 32.36% upside potential.
