Reddit stock jumps on S&P 500 news, faces Google risks
4 Investments Reddit stock jumped 11% after S&P 500 inclusion news. Strong growth, but faces risks from declining Google traffic and ongoing data licensing disputes.
Reddit's stock soared over 11% in after-hours trading after news broke that the company will join the S&P 500 index on August 18, replacing AvalonBay Communities following its acquisition by Equity Residential. This move makes Reddit only the second pure-play social media firm in the S&P 500, alongside Meta Platforms. The announcement sparked significant buying from index funds, which are required to purchase Reddit shares to mirror the benchmark, driving the sharp price increase. Reddit has posted eight consecutive quarters of revenue growth above 60%, highlighting its strong financial momentum. However, concerns remain about declining referral traffic from Google, which could impact Reddit's advertising and data licensing revenue. Ongoing disputes with Google over AI-generated search summaries and data licensing terms may lead to higher costs and less favorable agreements. Despite these risks, Reddit's S&P 500 inclusion marks a major milestone and is expected to attract more passive investment.
