We recently published a list of the 12 Best Up and Coming Stocks to Buy According to Wall Street Analysts. In this article, we are going to take a look at where Reddit Inc. (NYSE:RDDT) stands against other up and coming stocks to buy according to Wall Street Analysts.
Tom Lee, Fundstrat managing partner, joined CNBC’s ‘Closing Bell’ on March 22 to discuss the current market sentiment. When asked about the recent report on tariffs, which oscillates between an iron fist and an olive branch, Lee expressed optimism. He suggested that markets should interpret the situation positively because many clients view tariffs as punitive and potentially recession-inducing. However, a mutually agreed or reciprocal tariff deal could create a favorable scenario for businesses, potentially setting the stage for a significant recovery rally. Addressing the immediate challenge of volatility leading up to April 2, Lee acknowledged the dilemma investors face during this period of uncertainty. He noted that many are overwhelmed by market fluctuations and tempted to give up. Drawing a parallel to the Cuban Missile Crisis in 1962, which lasted 12 days, Lee pointed out that markets historically bottom before crises are resolved. For instance, during that crisis, the stock market reached its lowest point seven days in and recovered two-thirds of its losses before the resolution. He suggested this historical pattern could serve as a template for today’s market behavior.
When asked about the economy, Lee remarked on how quickly sentiment has deteriorated. He attributed part of this decline to divisive political leadership that affected consumer confidence and noted that CEO confidence has also dropped unexpectedly. CEOs have become hesitant to make decisions, which is contributing to what he described as a growth shock. However, he remained hopeful that this slowdown would be temporary if it does not persist for months. The conversation shifted to concerns about a potential recession, with Jeffrey Gundlach recently estimating a 50% to 60% chance of one occurring in the next few quarters. Lee countered this by stating that while a 10% drawdown in the S&P 500 already prices in a 40% chance of recession, markets do not fully align with Gundlach’s pessimistic view. He highlighted that economies like China, Europe, Canada, and Mexico have been outperforming the US since February 18. If punitive tariffs were truly driving global recessions, these economies would also be struggling. Instead, Lee described markets as more paralyzed than outright pessimistic.
Our Methodology
We used the Finviz stock screener to compile an initial list of the top stocks that went public in the last 5 years. We then selected the 12 stocks with high analysts’ upside potential as of March 21 that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
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) enables users to engage in conversations, explore passions, research new hobbies, and exchange goods and services. It organizes communities based on specific interests that enable users to engage in conversations by sharing experiences, submitting links, uploading images and videos, and replying to one another.
The company is enhancing its advertising platform by integrating AI-powered tools, such as the AI Headline Generator and Memorable AI, to improve performance and attract mid-market and SMB advertisers. It’s also focusing on brand safety and using its unique community intelligence to develop advertising solutions like Reddit Pro Trends. The company is investing in ad stack automation and advertiser diversification.
In Q4 2024, Reddit Inc.’s (NYSE:RDDT) advertising revenue surged by 60% year-over-year and reached $395 million. For the full year 2024, advertising revenue drove total revenue to $1.3 billion, which was a 62% increase. International advertising revenue saw a 77% growth. This is attributed to the company’s ability to connect brands with engaged users seeking trustworthy opinions across various advertising objectives, channels, verticals, and geographies.
Reddit Inc.’s (NYSE:RDDT) strong 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 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 4th on our list of the best up and coming stocks to buy according to Wall Street Analysts. 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.
