We recently compiled a list of the 10 Hot Growth Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Reddit, Inc. (NYSE:RDDT) stands against the other hot growth stocks.
The big rally in the broader stock market might have ceased, but there are a lot of things to focus on under the surface, says Morningstar. Notably, technology stocks, which were the leading contributors to the big bull market in 2023 and 2024, have seen strong declines in 2025. Elsewhere, other sectors including financial services, basic materials, and healthcare continue to see new investor interest.
Morningstar, while highlighting the comment from Michael Arone (chief investment strategist at State Street Global Advisors), mentioned that non-US markets including China, the UK, and Germany have seen strong rallies. Notably, the market strategists continue to see a subtle transition in leadership. The broader markets have been struggling to find focus due to the uncertainties related to the future. The US Fed rate cuts are not guaranteed this year, while inflation remains sticky. Also, the potential impact of Trump’s economic policy proposals is unknown yet.
Is a Market Rotation on the Horizon?
To provide a brief perspective, when a rotation occurs, the market investors tend to shift their focus from stocks that were critical to a strong trend to other parts of the broader equity market that have not seen much movement. Morningstar believes that there is plenty of evidence that a rotation is underway. Technology stocks, which have seen an increase of over 36% in 2024, are down in 2025. The NASDAQ-100 Technology Sector has seen a decline of ~0.74% on a YTD basis.
The basic materials sector was the worst performing sector in 2024. However, so far in 2025, related stocks have managed to deliver decent gains. Dow Jones U.S. Basic Materials Index increased by over ~6% on the YTD basis. Also, healthcare stocks have grabbed investors’ attention after they returned ~2.7% in 2024, says Morningstar. Dow Jones U.S. Health Care Index returned over 7% on a YTD basis. As per Dan Kemp, Morningstar chief research and investment officer, there seems to be a rotation in terms of valuations.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
UBS Remains Optimistic About S&P 500 in 2025 Despite Challenges
UBS has reiterated the importance of portfolio diversification and hedging in a bid to navigate the market volatility moving forward. Investors are required to consider capital preservation strategies so that they can limit the portfolio losses. Investors looking to build up long-term AI exposure can use structured strategies or “buy the dip” strategy in certain quality AI stocks.
UBS expects 2025 capex from the Big 4 US tech firms to increase by 35% to reach US$302 billion, with the firm seeing strong demand for frontier models. Due to the AI adoption trends fueling monetization, it projects mid-teens returns for global AI stocks this year.
Our Methodology
To list the 10 Hot Growth Stocks to Invest in According to Analysts, we used a screener to shortlist stocks that have gained at least 30% over the past 6 months and that analysts see at least 20% upside to over the next 12 months. Next, we ranked the stocks in ascending order of their average upside potential, as of March 5. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
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).
People interacting with a travel website, searching for the perfect destination.
Reddit, Inc. (NYSE:RDDT)
% Gain Over 6-Month Period: ~165.1%
Average Upside Potential: ~39.3%
Number of Hedge Fund Holders: 87
Reddit, Inc. (NYSE:RDDT) operates a digital community in the US and internationally. Needham analyst Laura Martin has maintained a bullish stance on the company’s stock, offering a “Buy” rating. The analyst’s rating is backed by several favorable performance indicators demonstrated by the company’s Q4 2024 results. Reddit, Inc. (NYSE:RDDT)’s total revenue went up by 71% YoY to $427.7 million in Q4 2024, with Ad revenue rising 60% YoY to $394.5 million. As per the analyst, these metrics demonstrate a strong business model and sound monetization strategies.
Furthermore, Reddit, Inc. (NYSE:RDDT) has successfully introduced new products such as Reddit Search and Reddit Answers, which continue to improve user discovery and engagement. Its gross margin expansion and healthy FCF projections further strengthen its financial health. Also, Reddit, Inc. (NYSE:RDDT)’s strategic moves in content licensing and international user growth with the help of AI-driven language translations can act as promising avenues for potential growth. The company’s investments in AI and ML continue to hold strong promise for fueling revenue growth. Its AI-powered search improvements and content recommendation algorithms can result in improved user engagement and time spent on the platform. This can help create more opportunities for ad impressions and revenue generation.
Reddit, Inc. (NYSE:RDDT)’s AI initiatives tend to go over and above the user-facing features. Its acquisition of Memorable AI and a strong emphasis on incorporating AI/ML into the advertising platform can lead to efficient ad targeting and improved ROI for advertisers. This can potentially attract larger ad budgets from current and new clients.
Overall RDDT ranks 6th on our list of the hot growth stocks to invest in according to analysts. While we acknowledge the potential of RDDT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
