Reddit, Inc. (NYSE: RDDT) stock is surging on Wednesday as market participants step in to buy following a sell-off after the company's third-quarter earnings report last week.

Broader market momentum also supports the move on Wednesday, with the Nasdaq advancing 2.18% and the S&P 500 rising 1.84%.

Reddit ended the previous week at $91.73, down 67.35% from its record high, bringing its market valuation down from $51.2 billion. Investors are taking advantage of the lower stock price.

Earnings And Traffic Headwinds

The prior drop occurred after Reddit reported quarterly results and addressed shifts in traffic. CEO Steve Huffman said artificial intelligence search tools have driven a sharp decline in search referral traffic, with October traffic dropping by more than 1 million referrals per week on average.

Even with traffic pressures, Reddit reported third-quarter revenue rose 53% to $895 million, gross margins reached 91.5%, and average revenue per user grew to $6.87.

Wall Street Sentiment

Following the update, Wall Street firms adjusted expectations. On Monday, DA Davidson cut its forecast from $185 to $125 while maintaining a Buy rating. Guggenheim's Michael Morris reduced his forecast from $255 to $170, and Needham's Laura Martin lowered hers from $300 to $150. Wells Fargo's Alec Brondolo adjusted his forecast to $110.

The average analyst price forecast for Reddit is $194.74, 87.5% above the current price. Of 25 analysts, 14 rate it Buy and 11 Hold. Forecasts range from $110 to $300.

Technical Analysis

Reddit is still in a longer-term downtrend, trading 25.1% below its 20-day SMA ($138.82) and 34% below its 200-day SMA ($157.40), so the bigger technical job is reclaiming those trend gauges before the chart looks "fixed." The bearish backdrop is reinforced by the death cross that occurred in March (50-day SMA below the 200-day SMA), which typically keeps rallies more tactical until proven otherwise.

Momentum, however, is stretched: RSI is 29.57, which signals the selling pressure has become extreme and the stock is in oversold territory where sharp countertrend bounces are common.

From a levels perspective, the current price is also much closer to the 52-week low ($89.28) than the 52-week high ($263.50), underscoring how damaged the longer-term structure remains after the recent swing low in October.

• Key Resistance: $130.07
• Key Support: $89.28

RDDT Stock Price Activity: Reddit shares were up 7.25% at $97.50 at the time of publication on Wednesday, according to market data.