Jim Cramer Just Called a Stock Down Nearly 30% This Year ‘Ridiculously Cheap’
Reddit's business is compounding at a pace few public companies can match, yet the stock keeps sliding. Jim Cramer sees a disconnect so extreme he used a word he rarely applies to growth names.
On the Aug. 25 episode of Mad Money, Jim Cramer responded to a lightning round caller asking about a potential Reddit (NYSE:RDDT | RDDT Price Prediction) and Netflix (NASDAQ:NFLX) tie-up with a direct call: “I think Reddit is such a buy at $166. It’s ridiculously cheap. So with or without synergy with Netflix, you’ve got what I regard as a buy.”
The stock he was talking about, Reddit, closed at $162.45 on Aug. 25 and has been one of the most punished growth names of 2026. But the gap between Cramer’s call and the tape is the whole story. Reddit is down nearly 35% year to date and down more than 25% over the past year, even as the underlying business continues to compound at a pace few public companies can match.
A Business Growing 61%, a Stock Falling 29%
Reddit’s Q2 2026 press release, filed July 30, laid out numbers that do not square with a 29% drawdown. Revenue rose 61.1% to $804.9 million, easily topping the $731 million consensus. EPS of $1.25 beat by 29.23%, marking the fifth straight quarter Reddit has cleared Street estimates. Net income more than doubled to $252.8 million, and adjusted EBITDA margin came in at 42.6%.
Advertising revenue jumped 64% to $762 million. Global ARPU climbed 36% to $6.18, and U.S. ARPU rose 51% to $11.85. On the call, CFO Drew Vollero pointed out that “Reddit grew more than 60% for the eighth consecutive quarter while operating cash flow adjusted EBITDA, net income, and GAAP EPS all more than doubled in the quarter year over year.”
Reddit’s Balance Sheet Agrees With Cramer
The company’s own capital allocation is the strongest supporting evidence for the “ridiculously cheap” thesis. In Q2, Reddit repurchased 1.5 million Class A shares at an average price of $157.57 under a $235 million program, with roughly $760 million remaining under authorization. Cash and marketable securities stood at $2.8 billion. Management is buying the same stock at nearly the same price Cramer flagged.
Valuation math shows why the bulls have oxygen. Alpha Vantage lists Reddit’s forward P/E at 30, with a PEG of 0.99 against expected growth, and an analyst target price of $214.84 versus the current quote. Sell-side coverage skews positive with six Strong Buy ratings and 17 Buy ratings.
Bear Case Has a Name: Search Referrals
The market is looking past the earnings and discounting the top-of-funnel. Reddit itself flagged that search referrals were choppy in Q2 with more volatile traffic later in the quarter, and it acknowledged low visibility into referral traffic from search engines as AI-generated answers absorb queries that used to land on Reddit threads. CEO Steve Huffman is leaning into a direct-usage strategy, saying “The direct users, the app users are worth multiples more than the search referral traffic.”
New app user retention was up 50% year over year on a relative basis, and Reddit now reaches over half a billion people weekly. Positioning has not helped either. Shares fell 8.78% between Aug. 14 and Aug. 25, giving back the S&P 500 inclusion pop.
What to Watch
Reddit guided Q3 revenue to $860 million to $870 million and adjusted EBITDA to $385 million to $395 million, implying continued sequential acceleration. The stock reaction from here will hinge on whether direct app usage can offset search decay, and whether the buyback pace picks up while shares sit below management’s Q2 average cost. As for the Netflix angle Cramer batted away, that comparison remains hypothetical. The concrete reality is a growth compounder with a 42% EBITDA margin trading well below where its own board is buying.
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Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
