Things have been rough for Reddit (RDDT) recently. The stock is down about 34% in 2026, and it closed at $159.36 on Thursday, which is well below its 52-week high of $263.50.
However, Jim Cramer thinks that drop is a good chance to buy the stock.
According to CNBC, on the October 15 Lightning Round of Mad Money, he said, “I want to buy Reddit. I think the stock is inexpensive.” Here’s why Cramer is recommending the stock despite the drop.
Why Cramer thinks Reddit’s drop is a buying chance
Reddit runs a large discussion site, and it makes most of its money by selling ads inside its communities. In addition to that, it now sells access to its library of posts to help AI companies train their models. That’s good business, considering how the AI market is booming. And the results are starting to show in its earnings.
Also read: Jim Cramer noticed something odd about the stock market
In its second quarter of 2026, Reddit said its revenue increased by 61% from a year earlier to $805 million, and its net income more than doubled to $253 million, according to its SEC filing. That was the eighth quarter in a row of over 60% revenue growth.
Cramer said back in September that a buyer could pay up to $40 billion for Reddit’s texts alone, since AI companies are hungry for the real human conversations that live on Reddit, Yahoo Finance reported.
The Google AI problem that’s scaring investors
Have you ever asked Google for an honest review or recommendation about something? If you have, there’s a good chance a Reddit thread popped up among the search options. Viewing that thread turns into page views and ad money for Reddit.
However, during Reddit’s second-quarter earnings call, CEO Steve Huffman said “Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter,” Yahoo Finance reported. The problem is that Google AI now answers questions directly on the search page, so fewer people need to click on the Reddit link.
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Reddit has previously said about half of its traffic comes from Google search referrals, so any slowdown there would show up quickly in the ad business.
Also, some volunteer moderators have complained that the content they help manage is being sold to AI firms through licensing deals, with none of the money going to them. If moderators keep pushing back, the ad engine could lose some of the momentum that is powering Reddit’s results today.
What everyday investors should think about before buying
Cramer has valid reasons for his call, but investors should still consider a few things. If Google’s AI search keeps satisfying people faster than Reddit’s AI data deals can replace the lost ad money, the company could still miss profit targets next year even if its total sales keep increasing.
Based on my analysis, Reddit is still a volatile stock, so if you want to buy in now, consider spreading out your purchase so a bad period won’t affect your whole investment. In fact, Cramer called Reddit “ridiculously cheap” when it was near $166 back in August, and the shares have actually dropped a bit lower since that time. That’s why it’s never a bad idea to be a bit cautious.
