Shares of Reddit (NYSE:RDDT | RDDT Price Prediction) are rallying Friday afternoon after S&P Dow Jones Indices announced late Thursday that the stock will be added to the S&P 500 prior to the start of trading on Tuesday, Aug. 18. Reddit stock is trading around $175, up 11% on the day.
Even with today’s pop, Reddit stock sits down 24% year to date (YTD). That leaves a real question for investors: what would it take to push shares back to $200, a level the stock traded at just one month ago?
The S&P 500 Pop Is Fading
Index inclusion is a mechanical buying event. Funds benchmarked to the S&P 500 have to own the stock once it enters the index. Traders know this, which is why they often front-run the move.
The intraday pattern tells that story. Reddit stock was up more than 15% early Friday, up 14% around midday, and by early afternoon was up 11%. The pop faded, evidently, as the session wore on.
Reddit qualified because S&P applies a 12-month trading history rule, which the committee recently cited when declining to fast-track SpaceX (NASDAQ:SPCX) after its June IPO. Reddit went public in March 2024 and has posted profits nearly every quarter since.
Why $200 Isn’t a Moonshot
The $200 level isn’t ambitious in historical terms. Reddit stock traded at $203.27 on July 14 and began the year at $229.87.
The stock is still up 213% from its March 2024 IPO price of $50.44.
The fundamental case is intact. The company’s Q2 2026 revenue rose 61% year over year to $805 million, marking Reddit’s highest-ever quarterly revenue. EPS jumped 178% to $1.25.
Furthermore, Reddit’s global daily active uniques grew 18% year over year to 130.3 million, and sales have increased by more than 10% in each of the past 13 quarters.
The Valuation Tension
Valuation considerations could hold the key to the $200 question. Reddit stock trades at a trailing twelve month P/E ratio of 39.64x. Meta Platforms (NASDAQ:META) trades at 21.64x, while Alphabet (NASDAQ:GOOGL) sits at 17.16x, the cheapest in the group.
Snap (NYSE:SNAP) has no P/E ratio because it isn’t profitable on a trailing 12-month basis. Also, the Global X Social Media ETF (NASDAQ:SOCL) carries a 19.49x TTM P/E ratio.
Even after the year-to-date decline, Reddit stock remains the most expensive name in its peer group. Getting back to $200 requires either further multiple expansion from an already-premium level or earnings growing into the multiple. Index inclusion drives mechanical flows rather than earnings.
The peer tape frames the divergence. Alphabet stock is up 10% YTD, Meta Platforms stock is down 10% YTD, Snap stock is down 34% YTD, and the Global X Social Media ETF is down 15% YTD.
The Bull and Bear Cases
KeyBanc analyst Justin Patterson framed the bull view cogently. He stated:
In our view, Reddit’s investments in community and ad monetization should create a durable >30% annual revenue growth business with a path to 50% EBITDA margin. Further, we believe Reddit’s data is becoming more valuable to LLMs and model training, creating a potential upside catalyst into 2027.
Reddit CEO Steve Huffman, speaking with Yahoo Finance, asserted that “Reddit is so naturally commercial: Forty percent of the conversations people are having organically on Reddit are more or less about what to buy.”
The bear case has weight, too. Yahoo Finance reported that investors question whether Reddit’s growth is sustainable, which is why the stock has lagged. The S&P 500 is up 13% for the year, so Reddit has trailed the index it’s about to join.
What to Watch Now
Investors can watch for whether index-inclusion buying materializes into next week or was already front-run, which today’s fading move hints at. Reddit’s Q3 results, due October 29, will test the 13-quarter streak of 10%-plus sales growth. Traders may want to watch for whether Reddit’s data licensing becomes a disclosed revenue line, as this is the 2027 catalyst that KeyBanc flagged.
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