Reddit Inc. (NYSE: RDDT) opened in the red this morning following reports that Steve Huffman, its chief executive, has significantly trimmed his stake in the social media stock in recent weeks.
In total, the firm’s top executive has unloaded nearly 65,000 RDDT shares since the start of August.
Moreover, Michelle Reynolds, the company’s chief of accounting, has sold over $0.2 million worth of Reddit stock this month as well.
Reddit shares have been among the top performers over the past four months. At the time of writing, they’re up roughly 150% versus Trump’s “Liberation Day” low of about $87 in early April.
Why insider sales are concerning for Reddit stock
Insider selling, especially when top executives are involved, is often viewed as a bearish signal. Why? Because executives have deep, non-public knowledge about their firm’s health and future prospects.
When they sell a significant portion of their own shares, it can suggest they believe the stock is overvalued or that negative news is on the horizon.
Huffman and Reynolds’ recent sales, therefore, raise concerns about insider confidence in Reddit’s near-term prospects. What it signals is: insiders are capitalising on recent gains rather than betting on future upside.
All in all, their moves add to skepticism about RDDT shares’ valuation and the forum social media firm’s growth trajectory.
This could pressure Reddit stock in the near term.
Why RDDT shares remain attractive as long-term holding
Reddit shares currently trade at a forward price-to-earnings (P/E) ratio of nearly 134, an exorbitant valuation that can spook even the highest-risk investors.
Still, former hedge fund manager Jim Cramer recommends sticking with RDDT stock for the long term as “it’s one of the best growth stories within the digital ad space.”
In a recent segment of Mad Money, Cramer praised the platform’s ability to monetise its vast user base, noting that its ad strategy is becoming increasingly sophisticated and profitable.
In fact, Reddit’s potential to rival established players like Meta and Google in targeted advertising warrants looking beyond valuation, he argued.
After all, “if you focused only on valuation, you missed every transformational tech stock the last two decades,” according to Wedbush analyst Dan Ives.
Jim Cramer believes the company’s strong earnings momentum will sustain moving forward as its unique, community-driven model offers advertisers high engagement and niche targeting benefits, which could continue to drive outsized growth.
Expanding advertiser interest is resulting in improving margins, which demands that investors own Reddit stock in 2025, he concluded.
How Wall Street recommends playing Reddit Inc in 2025
Wall Street analysts also agree with Cramer’s bullish view on RDDT stock, according to data from Barchart.
The consensus rating on Reddit shares currently sits at “moderate buy” with price targets going as high as $235, indicating potential upside of another 10% from here.
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