Reddit Stock Forecast: RDDT IPO debuts at $34 per share

  • Reddit spikes as much as 70% on NYSE on Thursday.
  • RDDT stock started off at $34 per share before trading got underway.
  • The initial Reddit market cap was $6.4 billion, but meme stock status could aid bulls.
  • ALAB stock IPO on Wednesday saw a 72% gain.

Reddit (RDDT) stock advanced 35% on Thursday afternoon following its IPO at 13:15 EST. The stock is trading at $46 per share at the time of writing but initially gained as much as 70% for an intraday high of $57.78.

Reddit has finally come to Wall Street after nearly two decades of operations. Founded in 2005 by University of Virginia roommates Alexis Ohanian and Steve Huffman, Reddit is ranked as one of the top 20 most popular sites on the internet globally. The social media site was priced at $34 a share or $6.4 billion in market capitalization before trading began.

The timing is good for Reddit stock as US stock exchanges are rising following remarks on Wednesday by Federal Reserve (Fed) Chair Jerome Powell, who said that the central bank would soon begin tapering its “quantitative tightening” program. The policy has seen the Fed reduce its balance sheet by $1.4 trillion thus far, and tapering that decline would theoretically make more room for investments in equities.

The Dow Jones has gained 0.7%, while the NASDAQ Composite advances 0.2% at the time of writing. 

Reddit stock news: The IPO is here

Another reason to be hopeful for the Reddit IPO is that Astera Labs (ALAB), a pure play on the hype surrounding artificial intelligence semiconductors, exploded 72% on its IPO on Wednesday.

Could Reddit follow suit? Possibly. The company has been priced at the top end of its range, but its $6.4 billion starter market cap is about half of the $10 to $15 billion valuation it was rumored to be worth back when management first began flirting with an IPO in late 2021. 

Reddit has more than 267 million active weekly users, a figure that few other websites can boast. Revenue rose by 21% to $804 million in 2023, and management was able to cut losses in half to just below $91 million.

Many observers think that Reddit stock could become a new meme stock since so many retail investors already use the platform. In fact, the r/WallStreetBets forum in which the meme stock craze of early 2021 emerged was listed on Reddit.

This could lead to a large surge in the share price as it did in the past for GameStop (GME) and AMC Entertainment Holdings (AMC). Like those stocks, Reddit lends itself to the meme sector since the platform is well-known for posting GIFs and internet memes.

Dow Jones FAQs

The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.

Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.

There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.

Reddit stock chart

RDDT 5-minute chart

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