Reddit's RDDT Soars 18% on Earnings Beat and Bullish Outlook—What's Fueling the Surge?

Summary
• Reddit (RDDT) surges 18% intraday to $229.45, breaking above $230.92 highs
• Q3 revenue jumps 68% YoY to $585M, net income hits $163M (28% margin)
• Guidance for Q4 revenue ($655–665M) exceeds $638M Street estimate

Reddit’s stock is in a tailwind after a blockbuster earnings report and aggressive guidance. The social media giant’s 68% revenue growth, 91% gross margin, and $236M adjusted EBITDA have ignited investor optimism. With a 52-week high of $282.95 still in reach, the stock’s 18% intraday rally reflects a perfect storm of financial outperformance and strategic momentum.

Earnings Beat and Guidance Fuel RDDT's Intraday Surge
Reddit’s Q3 results shattered expectations, with revenue soaring 68% YoY to $585 million and net income surging to $163 million (28% margin). The $236 million adjusted EBITDA and $185 million operating cash flow underscore operational discipline. CEO Steve Huffman highlighted 19% YoY DAUq growth to 116 million and a 41% rise in global ARPU to $5.04. Crucially, Q4 guidance of $655–665 million revenue (vs. $638M expected) and $275–285M adjusted EBITDA (vs. $259M expected) signaled unrelenting momentum. The stock’s 18% rally reflects a re-rating of Reddit’s monetization potential and user base scalability.

Interactive Media & Services Sector Mixed as Meta Slumps
While Reddit’s stock soared, the Interactive Media & Services sector showed mixed signals. Sector leader Meta (META) fell 1.15% intraday, contrasting with Reddit’s gains. Alphabet and Netflix remain underperformers, with AI investments and content costs weighing on margins. Reddit’s 68% revenue growth and 91% gross margin outpace peers, but its 186x dynamic P/E remains a stretch compared to Meta’s 25x. The sector’s divergence highlights Reddit’s unique value proposition in monetizing user engagement.

Options and ETFs to Capitalize on RDDT’s Volatility
• 200-day MA: $165.64 (well below current price)
• RSI: 47.68 (neutral, no overbought/sold)
• MACD: -4.44 (bearish) vs. signal line -5.63 (bullish crossover pending)
• Bollinger Bands: $190.32–$217.85 (current price at 229.45, above upper band)

Reddit’s 18% intraday surge has created a short-term overbought condition, but technicals suggest a continuation of the rally. Key levels to watch: 200-day MA ($165.64) as support and 52-week high ($282.95) as resistance. The stock’s 186x P/E and 91% gross margin justify a bullish stance, though volatility remains high. No leveraged ETF data is available, but options offer direct exposure.

Top Options Picks
1. RDDT20251107C225
• Call Option, Strike: $225, Expiry: 2025-11-07
• IV: 79.59%, Leverage: 19.20%, Delta: 0.558, Theta: -1.25, Gamma: 0.0147, Turnover: 1.23M
• IV (high volatility), Leverage (high gearing), Delta (moderate directional bias), Theta (rapid time decay), Gamma (responsive to price swings), Turnover (liquid)
• This call offers asymmetric upside if Reddit breaks $230. A 5% price move to $240.92 would yield a 61% payoff (max(0, 240.92 - 225) = $15.92).
2. RDDT20251107C230
• Call Option, Strike: $230, Expiry: 2025-11-07
• IV: 81.37%, Leverage: 23.42%, Delta: 0.486, Theta: -1.199, Gamma: 0.0146, Turnover: 1.59M
• IV (high volatility), Leverage (high gearing), Delta (moderate directional bias), Theta (rapid time decay), Gamma (responsive to price swings), Turnover (liquid)
• This call is ideal for aggressive bulls. A 5% move to $240.92 would yield a 47% payoff (max(0, 240.92 - 230) = $10.92).

Aggressive bulls may consider RDDT20251107C230 into a bounce above $230.

Backtest Reddit Stock Performance
Key take-aways• Strategy: Buy Reddit (ticker RDDT) at the close on any day its closing price has jumped at least 18 percent versus the previous day (intraday “surge” as requested). • Risk control: A simple 20 percent stop-loss was auto-added to avoid unlimited downside because the user did not specify an exit rule. No explicit take-profit or maximum holding-period constraint was imposed; positions stay open until the next stop-loss trigger or the back-test end date. • Test window: 3 Jan 2022 – 30 Oct 2025 (all available data since 2022). • Result highlights (net of stop-loss exits, gross of trading costs): – Total return: 41.79 % – Annualised return: 40.26 % – Max draw-down: 64.39 % – Sharpe ratio: 0.68 – Average trade return: 33.74 % (wins ≥ 94 %, losses ≈ –27 %) Interpretation1. Although headline returns look attractive, the extremely high 64 % draw-down and low Sharpe (0.68) indicate a volatile, risk-heavy profile. 2. Performance is dominated by a few outsized winners; most surges do not translate into proportional follow-through. 3. Adding a profit-taking rule (e.g., 50 % upside or 10-day time stop) or combining the surge filter with volume / sentiment screens might materially improve the risk-adjusted profile. Interactive reportSee the complete trade list, equity curve and distribution of returns in the embedded back-test report below.Feel free to explore the module and let me know if you would like further refinements—e.g., different stop-loss/take-profit levels, adding a holding-period limit, or testing alternative trigger thresholds.

RDDT’s Momentum Unlikely to Subside—Position for Next Move
Reddit’s 18% intraday surge is driven by a combination of financial outperformance, user growth, and bullish guidance. While the stock trades above its 52-week high of $282.95, the 186x P/E and 91% gross margin justify the premium. Key levels to watch: $230 (psychological hurdle) and $282.95 (52-week high). The sector’s mixed performance, with Meta down 1.15%, highlights Reddit’s unique value proposition. Investors should monitor the $200.02–$201.43 30-day support and $108.97–$112.64 200-day support. Aggressive bulls may consider RDDT20251107C230 into a bounce above $230.