Despite a hold rating from Reddit investors, the stock's price continues to rise by 15% in the post-IPO rally.

• During midday trading on Tuesday, Reddit shares increased by 15% to approximately $68.88, indicating investor enthusiasm for the company, which was the first major social media business to go public since Pinterest's 2019 IPO.
• New Street Research, the first analyst firm to rate a stock on Reddit, stated that it would not alter its $54 price target and anticipates "volatility prior to the first earnings report."
• "IrishRun" on Reddit regrets not purchasing more shares, but there was no assurance they would receive the desired amount, so they would still be wishing they had bought more.

Despite a prominent analyst giving the company a hold rating, the post-IPO rally continues.

During midday trading on Tuesday, Reddit's shares increased by 15%, reaching approximately $68.88, indicating investor interest in the company. This was the first major social media business to go public since Pinterest's 2019 IPO. On Monday, Reddit's shares rose about 30% during end-of-day trading, marking the beginning of its first week as a publicly traded company following its IPO last week, which raised approximately $750 million.

Despite New Street Research issuing a neutral rating on Reddit after its stock price soared, investors remain confident in the company, analysts noted in a Tuesday report.

New Street Research analysts, who were the first to rate Reddit stock, stated that they would not alter their $54 price target and anticipate volatility around the first earnings report, which is expected in early May, and three days after the lockup period ends, during which certain Reddit shareholders are prohibited from selling their shares.

According to New Street analysts, a data licensing win with OpenAI is expected to benefit Reddit financially, as investors believe that the ChatGPT maker will ink a deal with the social media platform. This is due to OpenAI CEO Sam Altman's 9% stake in Reddit.

Reddit's biggest shareholder, Altman, was a former board member and a Reddit investor. His stake in the company increased by $200 million to about $613 million after its IPO.

The success of Reddit's data licensing business depends on the current surge in generative artificial intelligence, fueled by large language models and related models that power software like ChatGPT and Google's Gemini. Although Reddit's primary business is online advertising, it views data licensing as a significant revenue opportunity. Additionally, the company recently formed an expanded partnership with Google, granting the search giant access to more Reddit data to train its AI models.

The FTC is investigating Reddit's data licensing business, which was disclosed in a March corporate filing. Reddit stated that it was not surprised by the FTC's interest and believed that it had not engaged in any unfair or deceptive trade practices.

"The FTC inquiry could slow the pace of new deal signings and will require attention and time dedicated to addressing the inquiry, which could be an opportunity cost for RDDT's legal team."

On Tuesday, Reddit's finance-related subreddits were abuzz with discussions about the company's rising shares since its IPO. Some Reddit users, including employees and their family members, were part of the company's directed-share program and were able to make millions of dollars in profits the day that Reddit went public on the New York Stock Exchange.

"bkarp00" on Reddit stated that the stock rally was being supported by the departure of quick cash IPO investors, who were unwilling to sell at current prices, indicating a belief in the continued growth of Reddit's stock value.

If Facebook's users are worth $30 billion per quarter and most of them don't use Reddit, and most Redditors don't use Facebook, how much is Reddit undervalued?

I regret not purchasing more shares, but there was no assurance I'd receive the desired amount, and I would still be wishing I'd bought more.

On Reddit's r/WallStreetBets subreddit, members were more focused on discussing the Nasdaq debut of Trump Media & Technology Group, which saw shares rise about 50% on Tuesday morning, rather than participating in the Reddit rally.

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