Reddit (RDDT) shares surged after S&P Dow Jones Indices confirmed the social media company will join the S&P 500 on August 18, replacing AvalonBay Communities. The change follows Equity Residential's acquisition of AvalonBay; the combined entity will be renamed Vivmark Residential and remain in the benchmark index.
The stock jumped more than 11% in after-hours trading Thursday, with reports citing an extended-session gain near 13% as investors anticipated forced buying by index funds. Reddit becomes only the second pure-play social media company in the S&P 500, alongside Meta.
Before the announcement, RDDT had been down about 31% year-to-date and more than 40% below its record high above $270. Despite that, Reddit posted its eighth consecutive quarter of revenue growth above 60%. In Q2 it reported earnings of $1.25 per share on revenue of $805 million, beating expectations of $0.97 per share and $731 million.
However, the company flagged "choppy" search referrals as Google's AI Overviews reduces click-throughs. CEO Steve Huffman argued Reddit's authentic conversations remain valuable, saying, "As AI makes information more abundant, the challenge is no longer finding content; it's finding context, personal opinion, and first-hand accounts."
Reddit has signed data licensing deals worth hundreds of millions of dollars with OpenAI and Google. The Wall Street Journal reported Reddit is threatening to block Google from scraping its platform for AI training as they renegotiate. Analysts remain divided: Piper Sandler lowered its target to $195 from $215, JPMorgan to $185 from $200, while Cantor and Wedbush maintained long-term optimism.
