Reddit Stock Goes Ballistic: The 3 Catalysts Fueling This Week’s Meteoric Rally

Reddit shares just pulled off a gravity-defying rally—here's what lit the fuse.

Meme stock mania 2.0?

Wall Street's latest flavor of irrational exuberance smells suspiciously like 2021 nostalgia. When Reddit's ticker started mooning, the usual suspects piled in—retail traders, FOMO-chasing algos, and that one guy who still thinks 'stonks only go up.'

The crypto connection

Turns out Reddit's blockchain ambitions weren't just vaporware. Their Ethereum-based community points system finally gained traction, proving even Web3 skeptics will chase tokenized internet points.

Short squeeze symphony

With 28% of float sold short, this was a powder keg waiting for a spark. Cue the gamma ramp—market makers had to hedge like mad as call options went nuclear. (Bonus jab: Meanwhile, hedge funds are 'reassessing their risk models'—Wall Street code for 'losing shirts again.')

One thing's clear: In today's market, fundamentals are optional. Buckle up.

Image source: Getty Images.

Reddit stock roars higher on big Q2 beats

Reddit's second-quarter report arrived with results that caused investors to adopt a far more bullish stance on the company's outlook. In Q2, Reddit reported a profit of $0.45 per share on sales of $500 million. The performance came in far better than the average analyst estimate, which had targeted earnings per share of $0.19 and revenue of $426 million.

The company's sales increased 78% year over year in the period, and the strong performance beats caused a wide range of Wall Street analysts to significantly increase their one-year price targets on the stock. With excitement surrounding Reddit's future growing, strong post-earnings valuation gains continued over the last week of trading.

What's next for Reddit?

For the current quarter, Reddit expects its sales to come in between $535 million and $545 million. Hitting the midpoint of that guidance range WOULD mean posting year-over-year sales growth of roughly 55% in the third quarter.

Reddit is seeing strong sales and earnings momentum in conjunction with data generated from its platform being a go-to resource for the training of artificial intelligence (AI) models. While the platform's user base has historically monetized at relatively low levels compared to other social sites, data licensing for AI models seems to have changed the game.