We recently published a list of the 12 Best IPO Stocks to Buy in 2025. In this article, we are going to take a look at where Reddit, Inc. (NYSE:RDDT) stands against other best IPO stocks to buy in 2025.
On February 25, Hamilton Lane co-CEO Erik Hirsch joined ‘Closing Bell Overtime’ on CNBC to discuss the developments that currently hinder the IPO pipeline. Erik Hirsch noted that there are two competing factors at play. On one side, there is general market uncertainty, which is currently the dominant issue. While on the other side, there are positive factors: many high-quality businesses in private markets are ready for an exit. They are mature, cash flow positive, and growing. The IPO market is the logical conclusion for them, and the public markets need more new names to reduce concentration in a few technology businesses. For the public markets to be healthy, they need fresh blood.
Hirsch believes the IPO market can have a good year without relying solely on software. There is room for more software companies, but there is also interest in traditional non-tech businesses to balance market weightings. He identified sectors that could see growth, such as manufacturing, which could benefit from reshoring and reinvestment in the US. The food supply chain and healthcare are also expected to benefit from administrative changes. Regarding President Trump’s positioning on tariffs, Hirsch thinks it is more about negotiating tactics than actual tariffs. If negotiations cease and tariffs become the focus, there will likely be a market reaction. The uncertainty extends to government job cuts, with questions about the scale of reductions and where displaced workers will go. Despite some positive signs for certain sectors and businesses ready for IPOs, market uncertainty, and regulatory changes are holding back the IPO market and dealmaking. The environment of unpredictability makes it challenging for companies to pursue IPOs or M&A deals at present.
Still, the IPO market holds promise due to a strong backlog of mature and high-quality private businesses eager for public exits.
Our Methodology
We used the Finviz stock screener to compile a list of the top companies that went public in the last 2 years. We then selected 12 stocks with high analysts’ upside potential that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close up of a user’s hand scrolling through a mobile social media application.
Reddit, Inc. (NYSE:RDDT)
Average Upside Potential as of March 21: 88.51%
Number of Hedge Fund Holders: 87
Reddit, Inc. (NYSE:RDDT) operates a global digital community platform. This platform allows users to engage in conversations, explore interests, and form communities around specific topics through various media sharing and interaction features. It fosters a space for users to connect and share experiences.
In Q4 2024, the company’s advertising revenue surged by 60% year-over-year and reached $395 million. For the full year, advertising revenue drove total revenue to $1.3 billion, which marked a 62% increase. International advertising revenue grew by 77% year-over-year. This growth is attributed to the platform’s ability to connect brands with engaged users seeking trustworthy opinions. It’s seen across various advertising objectives, channels, verticals, and geographies.
Reddit, Inc. (NYSE:RDDT) is enhancing its advertising platform to improve performance and usability. This includes investing in AI-powered tools like the AI Headline Generator and Memorable AI, which aim to attract more mid-market and SMB advertisers. The company is also focusing on brand safety and developing unique advertising solutions that use its community intelligence, such as Reddit Pro Trends. It’s also investing in increased automation of the ad stack, and diversification of advertisers.
The company’s exceptional quarterly earnings, user growth, and AI partnership news drove a stock surge, which made it a top performer for Columbia Threadneedle Global Technology Growth Strategy. The fund stated the following regarding Reddit, Inc. (NYSE:RDDT) in its Q4 2024 investor letter:
“Reddit, Inc. (NYSE:RDDT) was the single best-performing stock for the fund, as the stock surged during the quarter, with significant outperformance following its stellar quarterly earnings release. The capital-light social news aggregation platform — and the ninth most-visited website in the world — reported quarterly revenue, user growth and profit margins that came in considerably higher than even the most bullish of estimates, and the company also provided forward-looking guidance that came in well ahead of expectations on most metrics. After earlier announcing a data licensing partnership with AI pioneer OpenAI, investors ‘up-voted’ the evolving AI narrative for Reddit after gaining a better understanding of its unique and hard-to-replicate trove of content generated by its growing and increasingly global user base.”
Overall, RDDT ranks 1st on our list of the best IPO stocks to buy in 2025. While we acknowledge the growth potential of RDDT, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RDDT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
