Why Reddit Stock Was Moving Higher This Week

Shares of Reddit (NYSE: RDDT) were moving higher this week after the company launched two new AI-powered advertising tools and benefited from some positive analyst commentary on the stock.

According to data from S&P Global Market Intelligence, the stock was up 19.4% for the week as of Wednesday's close.

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Reddit gets a tailwind

At the Cannes Lions festival, Reddit announced Reddit Community Intelligence, a new tool that can power insights for advertisers from more than 22 million posts on Reddit.

As part of the launch, it introduced two new "early stage products," Reddit Insights and Conversation Summary Add-ons.

Reddit Insights is a "scalable, AI-powered social listening tool" that gives marketers proprietary data to help guide ad campaigns.

The Conversation Summary add-on integrates positive user content directly below an ad, helping to get ads better placement and views.

Advertising is Reddit's primary source of revenue, but the company has historically struggled to monetize its platform the way some larger social media platforms have.

On Wednesday, Reddit jumped 5.5% as B. Riley said that Meta's deal with Scale AI, in which it's spending $14.3 billion on a 49% stake in the data labeling company, was a positive sign for Reddit as point to the value of the content on its platform, which Reddit refers to as its "corpus."

What's next for Reddit

Reddit has been a big winner since its IPO last month, but the stock has also pulled back sharply from its peak as investors seem to be doubting whether the company can maintain its strong growth rate.

The launch of the AI advertising tools is a step in the right direction, as anything it can do to maintain its momentum in both usage and advertising growth should help drive the social media stock higher.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.