We recently published an article titled Jim Cramer on Super Micro Computer and Other Stocks. In this article, we are going to take a look at where Reddit, Inc. (NYSE:RDDT) stands against the other super micro computer stocks.
As earnings season kicks off, Mad Money’s host, Jim Cramer reminds investors that bad news can often be factored into a stock’s price ahead of an earnings report. He cited the recent example of PepsiCo, which saw its shares decline before rebounding despite reporting a revenue miss.
Cramer highlighted that when a stock has already faced significant sell-offs leading into a quarter, it is challenging for it to drop further unless the results are exceptionally poor. “This is something you need to keep in mind as we head into earnings season,” he advised, emphasizing the market dynamics at play.
Cramer also expressed his disagreement with the Department of Justice’s exploration of a potential breakup of Google. He argued that such companies play a vital role for consumers, businesses, and the U.S. economy. Acknowledging the power of major tech firms, Cramer pointed out that their substantial customer bases and immense financial resources provide them with advantages that are essential for success.
He went on to say that these companies have become the envy of nations, especially considering that many countries invest heavily in nurturing their own national champions. In contrast, Cramer questioned the approach taken in the U.S., emphasizing the need for capital to foster growth.
“The best companies we have, the best companies in the world, we’re dealing with companies that have done amazing things for the American people, and yet they’re vilified by the Justice Department’s antitrust division, [and] of course, the Federal Trade Commission. Think about it.”
He warned that if the courts side with the DOJ and the FTC, consumers might not benefit as expected. Cramer explained that undermining these companies could open the door for foreign entities, particularly those backed by government subsidies, to fill any gaps left in the market.
“Believe me, if the courts agree with the Justice [Department] and the FTC, let me tell you something. Here’s what’s going to happen. Your prices ain’t coming down, they’re going up. We hurt these companies too much and we don’t have to worry, the PRC will come in with something subsidized by their government that will happily step in the void.”
He challenged the perception that wealth generated by these tech giants is solely hoarded by executives, asserting that investors also stand to gain. He stated:
“You could own the stocks right alongside them. In fact, as I tell CNBC Investing Club members daily, you should…I don’t know what will happen when the Biden administration runs its course, but I gotta tell you, I certainly won’t miss the ruthless prosecution and hectoring of Big Tech…The American government [is] so upset at the power of these companies that it’s insisting the tech titans should simply be less good. To which I say, good for who? Good for what? Certainly not us…Bottom line, I find this endless string of government investigations wrong-headed, pointless, and frankly, even anti-American.”
Our Methodology
For this article, we compiled a list of 10 stocks that were mentioned by Jim Cramer during the lightning round of his episode of Mad Money on October 9. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A content marketing website showing the audience reach of the company’s products.
Reddit, Inc. (NYSE:RDDT)
Number of Hedge Fund Holders: 39
During the lightning round, a caller asked Cramer if Reddit, Inc.’s (NYSE:RDDT) stock was still in play and this was his response:
“I like Reddit very much. Steve Huffman’s going to put up some really good numbers. He’s got a great long-term model. I think he’s doing a rather remarkable job at Reddit.”
The company operates a dynamic platform that facilitates the formation of digital communities centered around specific interests, allowing users to engage in conversations by sharing experiences, posting links, and uploading multimedia content. Since March 20, the company has been listed on the New York Stock Exchange, marking a significant milestone in its growth trajectory.
In August, Cramer, mentioning “the eighth-largest IPO”, called it a “pleasant surprise”. He went on to say:
“After speaking to CEO Steve Huffman, a.k.a. “spez,” I think Reddit has the potential to be a good destination for advertisers, but the digital advertising market’s gotten tougher as of late. That didn’t stop Reddit from reporting a pair of strong quarters since it became public. I say keep up the good work, spez—you’re going higher.”
On October 9, Jefferies analyst John Colantuoni initiated coverage on Reddit (NYSE:RDDT) with a Buy rating and a price target of $90. Colantuoni forecasts that the company’s EBITDA will more than double in the next two years, potentially reaching around $450 million. The forecasted growth is attributed to a significant expansion in the user base, which is expected to narrow the monetization gap with competitors.
Moreover, the analyst sees potential for Reddit (NYSE:RDDT) to secure additional high-margin data licensing agreements, which could give a boost to profitability. As the applications for generative AI continue to evolve, the value of the company’s extensive database of contextual content is likely to increase, positioning the company to capitalize on these emerging opportunities.
Overall RDDT ranks 5th on Jim Cramer’s list of super micro computer and other stocks to buy. While we acknowledge the potential of RDDT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RDDT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.