Key Points
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Reddit got a boost after introducing its new Community Intelligence product at the Cannes Lions festival.
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One analyst also said Meta Platforms’ deal with Scale AI is positive for Reddit stock.
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The company has delivered impressive growth since it went public a year ago.
Shares of Reddit (NYSE: RDDT) were on a tear last month, as the stock benefited from the broader gains in the stock market, the company released a new Community Intelligence product that impressed the market, and other positive news around artificial intelligence (AI) helped lift the stock.
According to data from S&P Global Market Intelligence, the stock finished the month up 34%.
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As you can see from the chart, most of the stock’s gains came in the middle of the month, though it also benefited from a late surge in the broad market as tensions in the Middle East cooled.
RDDT data by YCharts
Reddit rides the AI wave
The big news around Reddit last month was its introduction of Reddit Community Intelligence, which it unveiled at the Cannes Lions Festival. The new platform, which the company described as the “collective knowledge from the billions of human conversations across Reddit,” has two main features.
The first is Reddit Insights, a tool that gives marketers real-time insights based on Reddit’s 20 years of conversations to help them plan campaigns and make better decisions. The second is Conversation Summary Add-ons, an ad feature that integrates positive content from Reddit users directly below an advertiser’s post.
Both products are only in alpha, meaning they’re being tested by a small group of customers right now, but the initiative shows Reddit doing more to tap into its trove of user-generated content, which can fuel both AI and the company’s own advertising engine. The stock jumped 19.4% over a three-day period during the Cannes festival.
Elsewhere, the company received some bullish analyst commentary around Meta’s acquisition of Scale AI, which could raise the premium for the kind of data-licensing business that Reddit is trying to build with its “corpus,” or body of content.
Image source: Getty Images.
What’s next for Reddit?
Reddit stock has exploded since its IPO last March, as the company has both delivered strong growth and turned profitable. Reddit had previously been operating at a loss for much of the 20 years prior to going public, and a combination of factors seem to be driving the business, including its utility in the AI era, interest in an alternate social media advertising platform, and attention around the company following its IPO.
The excitement around the new Community Intelligence tool shows that investors seem to believe in the company’s potential with AI and advertising. It’s unclear if that will move the bottom line anytime soon, but Reddit is a unique asset in its industry. The stock is risky, but it has considerable upside potential.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
