Is Reddit a Good Stock to Buy? February 2025 Review

Alright, let’s talk about one of this week’s underperformers – Reddit (RDDT). After a mixed Q4 report, the stock (February 17-21) dropped 15%. The culprit? Google and its algorithms, which allegedly caused a decline in Reddit’s active user count during Q4. Despite this setback, since its IPO in March 2024, the stock is still up over 250%. So, let’s break it all down – Growth and Monetization Potential, whether RDDT is a meme stock, a quick dive into Challenges and Risks, a look at Performance and Key Metrics, and finally, the big question: Is Reddit a good stock to buy or better to sell?

Reddit Growth and Monetization Potential

Originally, RDDT was simply a massive online forum with so-called “subreddits,” where users could discuss practically any topic. The company also sticks to its well-known “karma” system—spam and intrusive ads get quickly flagged and removed.

Over the past decade, the platform has grown significantly. According to Q4 data, Reddit’s daily active users exceeded 101 million, though Wall Street had projected 103.1 million—a miss that contributed to the stock’s decline. Still, let’s be real—101 million is a massive audience. That kind of reach attracts advertisers and gives the company strong monetization potential.

Is Reddit a Good Stock to Buy or Another Meme Stock?

Reddit’s (RDDT) strong share-price growth largely stems from investors’ belief in the platform’s promising revenue streams. It’s worth noting that Reddit continues to develop advertising tools and offers a paid subscription known as Reddit Premium. This subscription grants active members extra features and removes pesky ads. As a result, the company has been strengthening its financial base—even if it’s still operating at a loss for the time being.

We also have to mention the unique “meme stock” phenomenon, which repeatedly made waves in the market. The r/WallStreetBets community on Reddit has influenced the share prices of companies like GameStop and AMC, once again showing how volatile the stock market can be. Reddit’s ability to bring together highly coordinated groups of traders—often acting swiftly and in unison—presents not only risk but also a potential catalyst for the platform’s popularity. All the buzz around “meme stocks” draws new users and expands advertising opportunities. However, there’s no evidence of hype being artificially driven to boost Reddit’s own stock.

Challenges and Risks of Investing in Reddit 

It’s always crucial to remember that rapid stock growth carries its own set of challenges. Reddit (RDDT) currently operates at a loss, and the resulting negative P/E ratio prompts analysts to keep a close eye on the company’s earnings reports. Investors want to see a clear path to profitability over the long haul.

Meanwhile, growing competition among social platforms could slow Reddit’s user-base expansion. TikTok, X, Threads, Meta, and Instagram are all vying not just for user attention but also for advertisers’ budgets. This means Reddit must continually innovate, refine its moderation systems, and evolve its content formats to keep users engaged.

From time to time, reputational issues arise due to toxic subreddits. It’s worth noting that Reddit has already taken steps to strengthen moderation. Still, for major advertisers, reputation is priority number one. Reddit’s ability to enforce firm but transparent moderation policies will be key in retaining major partners.

Reddit (RDDT) Performance and Key Metrics in February 2025

Now, let’s talk key metrics. After the Q4 report, RDDT saw a significant drop, losing 15% between February 17-21. The stock is currently trading around $166, with a market cap of $30 billion. Despite its post-IPO rally, the recent decline has investors re-evaluating Reddit’s long-term potential. A negative P/E (-3.33) remains a major risk factor, signaling that profitability isn’t on the horizon just yet.

Is Reddit a Good Stock to Buy or Better to Sell?

So, what’s our take on RDDT? The post-Q4 selloff makes sense—user growth didn’t quite meet expectations. However, we still see Reddit as an interesting long-term play. Our rating: HOLD/BUY. Now, the big question is—what’s next for the stock in the final week of winter? Have we hit the bottom, or is there more downside ahead? At this point, that’s anyone’s guess. You might also be interested: Are Grab and Dell a Good Stock to Buy in 2025?