At its peak in February, Reddit's stock had risen over 500% from its IPO price, partly fueled by deals involving AI model training. However, concerns about the long-term growth of the AI industry have emerged. The average analyst price target has decreased to $195, still offering potential upside from current levels. Additionally, Reddit faced a service disruption affecting over 33,000 U.S. users, attributed to a bug in a recent update, which has since been resolved. Despite Reddit's strong growth rate, it remains unprofitable, with a GAAP EPS loss of $3.33 in 2024, though it reported positive GAAP EPS in the latter half of the year.
Key takeaways:
- Reddit's stock price has dropped significantly, with a nearly 50% decline since February 7th and an additional 10% drop this week, due to volatile technology stocks and gloomy sentiment around the company.
- The company's struggles are linked to its inability to compete with larger digital advertising peers and a hit to U.S. traffic from a change in Google's search algorithm.
- Short interest in Reddit has increased, and analysts have lowered their price targets, with some recommending selling the shares due to heavy reliance on Google.
- Reddit experienced a significant outage affecting over 33,000 U.S. users, attributed to a bug in a recent update, which has since been fixed.