U.S. social media company %Reddit (NYSE: $RDDT) is being added to the Russell 2000 index of small-cap stocks.
Reddit, which runs online message boards including the popular %WallStreetBets, is slated to become a constituent of the Russell 2000 index on June 27 of this year.
The addition is good news for Reddit and its shareholders as it means mutual funds and exchange-traded funds (ETFs) that track the Russell 2000 will be required to buy the stock.
Reddit went public in March 2024 and since then its share price has gained 129%. The company’s initial public offering (IPO) was widely viewed as a success.
However, in recent months, RDDT stock has suffered as the company’s financial results have disappointed and amid signs of slowing growth at the social media concern.
As a result, Reddit’s share price has pulled back 37% this year. Investors may want to buy-the-dip as the company joins the Russell 2000.
Other reasons to have faith in Reddit include an impressive 90% gross profit margin and revenue growth of 64% over the last 12 months.
Reddit’s message board platform also boasts more than 100,000 active communities and 108 million daily active users.
WallStreetBets remains a go-to-site for retail investors and people interested in cryptocurrencies.
Inclusion in the Russell 2000 index is expected to enhance Reddit’s visibility and exposure to institutional investors.
There’s no dividend and the valuation is rich with the shares trading at more than 100 times this year’s earnings estimates.
However, the company’s growth remains strong and the addition to the Russell 2000 index should give the share price an added boost.
RDDT stock is currently trading at $105.43 U.S. per share.
