Reddit usually exists as a platform, where people create memes, participate in debates, while they explore various online topics. However, the institutional investors have started to look at it as a legitimate investment opportunity.
Resona Asset Management Co. Ltd. increased its ownership of Reddit by 53.2% during the third quarter when it purchased 10,743 shares, which brought its total to 30,944 shares, having a current value of $7.16 million. This is a definite choice to ‘buy’, which is confirmed through the active selection of the purchasing option. The investment demonstrates that institutional investors have higher confidence about Reddit’s business growth after its IPO, along with its ability to generate revenue through online conversation streams.
Hedge Funds Join the Conversation
Resona is not the only company that has started to support Reddit stock. Several hedge funds and wealth management companies have made secret changes to their investment strategies, as firms like AdvisorNet Financial, Kingswood Wealth Advisors, Platinum Investment Management, and many more have expanded their market presence.
The additions which occurred during this period resulted in institutional investors showing consistent interest in the platform, as they began through these small-scale investments. Even Covestor, which exists as a smaller company, expanded its holdings by more than doubling its holdings, as all investors including larger funds and smaller investors want to participate in Reddit discussions.
Wall Street Analysts
Mostly, analysts seem to like what they see. The stock market performance of Reddit results in different rating outcomes, which includes ‘buy’, ‘outperform’, ‘neutral’, and ‘hold’ with price targets that reach up to $325. The general perspective supports moderate optimism, as the stock shows a “Moderate Buy” rating, which includes a target price of $245.18.
The latest earnings report from Reddit proved beneficial to their case, because the company exceeded forecasts and achieved a 67.9% increase in revenue compared to the previous year. The platform that investors used to consider disorganized and impossible to generate revenue, now achieves success that Wall Street recognizes.
Insider Selling
This stock story also has a bit of drama to it, but it doesn’t lead to any alarming situation. The company has also experienced insider share ‘selling’, which exceeded $114 million through various executives, including CEO Steve Huffman, Benjamin Seong Lee, and others.
Such insider share sales definitely generate headlines, but they do not necessarily indicate business problems when the company leaders maintain its substantial ownership. The sales simply represent portfolio management activities, as the insiders hold 34.25% of the stock in the organization. The situation demonstrates that even dedicated followers sometimes have to choose to exchange their rewards for some material benefits.
Stock Performance Shows Volatility but Not Weakness
Reddit shares experienced extreme price fluctuations, as they traded between a 52-week low price range that reached $79.75 and a high of $282.95. The current trading price of the shares, which is $213.96 demonstrates high growth potential. However, the typical price fluctuations seen in newly public technology companies is very normal.
The firm has a market cap of $40.54 billion, a price-to-earnings ratio of 122.96, a PEG ratio of 1.49 and a beta of 2.17, which makes Reddit an unsuitable investment for those people who avoid risks, and who want to avoid high-risk investments.
Bottom Line
Reddit has transformed from a specialized online community into a major public corporation, which now demonstrates its market power through earnings reports, analyst evaluations, and institutional investor holdings. On one hand, the combination of market fluctuations and insider share sales will create uncertainty for investors.
On the other hand, the increasing hedge fund activity, along with exceptional revenue expansion demonstrates that Reddit has discovered effective ways to make money from its unpredictable chaotic nature. The current state of Wall Street shows that traders will continue their analysis of Reddit, while observing its ability to convert user comments into profitable content.
