Reddit (RDDT) Surges 7.3% on Analyst Hype and AI-Driven Optimism – What’s Next?

Summary
• Reddit (RDDT) jumps 7.3% intraday to $261.93, hitting a 52-week high of $262.56
• Evercore ISI initiates coverage with a $320 price target (30% upside)
• DCF analysis suggests $244 share price is 36% undervalued relative to intrinsic value
Reddit’s explosive move reflects a confluence of bullish analyst ratings, AI-driven growth narratives, and a volatile social media sector backdrop. With the stock trading near its 52-week peak and a dynamic options chain, traders are scrambling to position for the next phase of this AI-native story.

Analyst Hype and AI-Driven Optimism Fuel Reddit’s Surge
Reddit’s 7.3% intraday rally stems from a dual catalyst: Evercore ISI’s high-conviction 'Outperform' rating with a $320 price target and renewed focus on AI monetization. The firm highlighted Reddit’s potential to monetize user engagement through advanced ad products and AI data licensing, projecting 30%-40% CAGR in revenue. Meanwhile, a DCF analysis by Simply Wall St suggests the stock is trading 36% below its intrinsic value of $384, creating a compelling value narrative. These factors, combined with Reddit’s recent 400% EPS growth and 68% revenue acceleration, have reignited speculative fervor in a sector primed for AI-driven disruption.

Social Media Sector Volatile as Meta Slumps, Reddit Soars
The social media sector remains a battleground of divergent trajectories. While Reddit surges, sector leader Meta (META) declines 2.16% intraday, reflecting mixed sentiment. Reddit’s AI-centric monetization strategy contrasts with Meta’s struggles to balance regulatory scrutiny and ad revenue growth. However, Reddit’s 7.3% move aligns with broader AI-driven stock rotations, as platforms like TikTok and X also test new ad formats. The sector’s volatility underscores a key theme: investors are increasingly rewarding companies that demonstrate clear AI integration and scalable monetization pathways.

Options and ETFs Highlight Reddit’s Volatility – Strategic Plays Emerge
• RSI: 59.3 (neutral to overbought threshold)
• MACD: 8.08 (bullish momentum with signal line at 7.49)
• Bollinger Bands: Price at 257.24 (upper) vs. 213.30 (lower) – strong overbought positioning
• 200D MA: 178.05 (far below current price)
Reddit’s technicals suggest a continuation of its bullish trend, with key support at $232.86 and resistance at $257.24. The stock’s 7.3% move has triggered a surge in options activity, with two contracts standing out for their leverage and liquidity:

• RDDT20260123C260 (Call):
- Strike: $260 | Expiry: 2026-01-23 | IV: 56.29% | Delta: 0.570 | Theta: -0.984 | Gamma: 0.015 | Turnover: 420,100
- IV (Implied Volatility): High volatility suggests strong market expectations
- Delta (0.570): Moderate sensitivity to price changes
- Theta (-0.984): Aggressive time decay favors short-term holding
- Gamma (0.015): High sensitivity to price acceleration
- Turnover (420,100): Strong liquidity ensures easy entry/exit
- Leverage Ratio: 22.10% – amplifies returns on a 5% upside move
- Payoff: At $275 (5% above $261.93), intrinsic value = $15, net profit = 15/260 = 5.77x return
- Why it stands out: Combines high leverage with moderate delta for a controlled bullish play

• RDDT20260123P255 (Put):
- Strike: $255 | Expiry: 2026-01-23 | IV: 61.64% | Delta: -0.362 | Theta: -0.088 | Gamma: 0.013 | Turnover: 554,529
- IV (61.64%): Elevated volatility captures market uncertainty
- Delta (-0.362): Moderate bearish exposure
- Theta (-0.088): Low time decay suits longer holding
- Gamma (0.013): Sensitive to price reversals
- Turnover (554,529): Exceptional liquidity for hedging or short-term plays
- Leverage Ratio: 35.53% – amplifies downside protection
- Payoff: At $248.83 (5% below $261.93), intrinsic value = $6.67, net profit = 6.67/255 = 2.62x return
- Why it stands out: Ideal for hedging bullish positions with low theta decay

Trading Opinion: Aggressive bulls should target RDDT20260123C260 into a break above $262.56 (intraday high). Cautious traders may pair this with RDDT20260123P255 for downside protection. The 52-week high at $282.95 remains a critical psychological level to watch.

Backtest Reddit Stock Performance
The backtest of RDDT's performance following a 7% intraday increase from 2022 to the present shows favorable results. The strategy was tested 228 times, resulting in a 3-day win rate of 59.21%, a 10-day win rate of 61.40%, and a 30-day win rate of 69.74%. The average returns over these periods were 2.01% over 3 days, 5.28% over 10 days, and 16.63% over 30 days, with a maximum return of 28.64% achieved on day 59.

Reddit’s Rally Gains Momentum – Watch for Breakouts and Sector Shifts
Reddit’s 7.3% surge reflects a perfect storm of analyst optimism, AI monetization potential, and sector rotation. With technicals favoring continuation and options liquidity surging, the stock is primed for a breakout above $262.56. However, Meta’s -2.16% intraday decline highlights sector fragility. Traders should monitor Reddit’s ability to hold above its 200D MA ($178.05) and the 52-week high ($282.95). For now, the RDDT20260123C260 call option offers the most compelling leverage, while the sector’s AI-driven narrative remains the key catalyst. Action: Buy RDDT20260123C260 into a break above $262.56, or short RDDT20260123P255 if volatility spikes.