The social media inventory is up 540% in lower than a yr and a half.
Reddit (RDDT -1.62%) has solely traded since its preliminary public providing (IPO) in March 2024. Since then, its shares have surged as buyers grew to become extra conscious of how the corporate differentiates itself from different social media shares, significantly trade big Meta Platforms.
When looking for shares that may assist them develop into millionaires, many buyers take a look at current IPO shares, ideally ones whose progress story has simply begun. Given its successes and its current transfer to go public, let’s study whether or not Reddit holds sufficient progress potential to mint millionaires.
Picture supply: Getty Pictures.
Understanding Reddit
Reddit differentiates itself from different social media websites by performing as a “group of communities.” Its website now hosts over 100,000 communities. These have made it a go-to vacation spot for info — a lot in order that 110 million each day energetic customers go to its boards, a quantity that has risen by 21% during the last yr.
Not surprisingly, Reddit follows the lead of its social media counterparts by incomes most of its income from digital promoting. Extra income comes from information licensing and premium subscriptions.
That mannequin has helped the corporate develop to an unlimited measurement. Due to the 540% acquire over the inventory’s historical past, its market cap now stands at simply over $39 billion.This might current challenges if you happen to’re a person investor hoping to develop into a millionaire from this inventory. For those who purchased $10,000 price of shares at this degree, the 100-fold acquire wanted to multiply your place to $1 million would take the market cap to $3.9 trillion.
That is greater than double Meta’s present market cap of $1.9 trillion. It is also price noting that solely two corporations, Nvidia and Microsoft, now have market caps above $3.9 trillion. So that you’d face a substantial problem in assembly that $1 million objective.
Reddit’s second-quarter outcomes
Nevertheless, the corporate’s monetary outcomes for the second quarter of 2025 present the potential for enormous inventory features. In Q2, Reddit introduced in $500 million in income, a 78% improve from year-ago ranges. Promoting income progress of 84% throughout that interval drove most of these features, demonstrating its success as a social media inventory. Additionally, gross margin improved 130 foundation factors to 90.8%, pointing to an bettering monetary situation.
Furthermore, prices and bills grew by a relatively modest 38%, permitting Reddit to show worthwhile. In Q2, it reported a web revenue of $89 million, an unlimited enchancment over the $10 million loss within the second quarter of 2024. Not surprisingly, shareholders can even anticipate progress to proceed into Q3. Reddit forecasts Q3 income of between $535 million and $545 million. That may translate to a yearly improve of 55% on the midpoint.
Nevertheless, that steering would additionally quantity to a sequential slowdown, and it is unclear how buyers will react given the inventory’s valuation. Reddit’s current profitability leaves it with a P/E ratio of 329 — doubtless not relevant as a valuation measurement — although the ahead P/E ratio of 59 might appeal to new buyers.
Nonetheless, you may additionally think about the price-to-sales (P/S) ratio of 25, now near report highs for the inventory. It is affordable to anticipate this metric to exceed the S&P 500‘s common P/S of three.2, however chances are you’ll be much less tolerant of the present a number of when earnings progress is slowing down. Whereas that is unlikely to vary Reddit’s long-term progress prospects, it makes the inventory’s near-term trajectory much less sure.
Will Reddit inventory assist you to develop into a millionaire?
In its present state, Reddit could assist you develop into a millionaire, however it’s unlikely to take you there with no sizable funding. Reddit leads the trade by way of on-line boards, and its huge consumer base and fast income progress ought to bode nicely for shareholders.
Nonetheless, its $39 billion market capitalization places it deep into large-cap territory. Contemplating that 100-fold progress would take it to a measurement greater than double that of the dominant social media inventory, it is unlikely that an funding of $10,000 or much less can develop to $1 million.
In the end, Reddit reveals appreciable potential to ship market-beating returns over time. Nonetheless, you ought to be prepared to make a considerable funding if you wish to develop a Reddit inventory place to $1 million and past.
Will Healy has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
