Reddit (NYSE:RDDT) Shares Gap Down Following Analyst Downgrade

Key Points

• Reddit shares fell sharply after Wedbush cut its price target from $250 to $221, opening at $147.70 versus the prior close of $178.04. Wedbush nevertheless maintained an “outperform” rating.
• Reddit reported a strong second quarter, with adjusted EPS of $1.25 and revenue of $804.9 million, up 61% year over year and ahead of analyst estimates. The company also issued third-quarter revenue guidance above Wall Street expectations.
• Despite improving analyst sentiment and a consensus “Moderate Buy” rating, investors remain concerned that Google’s AI search features could reduce referrals, user engagement and advertising revenue. Insiders have sold 169,141 shares worth about $28.7 million over the past 90 days.

Reddit Inc. (NYSE:RDDT - Get Free Report) gapped down prior to trading on Friday after Wedbush lowered their price target on the stock from $250.00 to $221.00. The stock had previously closed at $178.04, but opened at $147.70. Wedbush currently has an outperform rating on the stock. Reddit shares last traded at $139.6010, with a volume of 5,172,033 shares changing hands.

Other analysts have also issued reports about the company. Piper Sandler reissued an "overweight" rating and set a $215.00 target price on shares of Reddit in a report on Thursday, July 9th. Jefferies Financial Group set a $250.00 price target on Reddit in a research note on Friday, July 10th. Raymond James Financial set a $180.00 price objective on shares of Reddit and gave the stock a "market perform" rating in a research report on Friday, May 1st. Bank of America reduced their price objective on shares of Reddit from $205.00 to $175.00 and set a "neutral" rating on the stock in a research note on Thursday, April 2nd. Finally, The Goldman Sachs Group reissued a "neutral" rating and issued a $200.00 target price on shares of Reddit in a report on Friday, May 1st. Two research analysts have rated the stock with a Strong Buy rating, twenty have assigned a Buy rating and eleven have issued a Hold rating to the company's stock. According to data from MarketBeat, the company presently has a consensus rating of "Moderate Buy" and a consensus price target of $228.00.

Insider Buying and Selling at Reddit

In other news, CEO Steve Ladd Huffman sold 18,000 shares of the firm's stock in a transaction on Monday, June 15th. The shares were sold at an average price of $178.26, for a total transaction of $3,208,680.00. Following the completion of the transaction, the chief executive officer owned 373,814 shares of the company's stock, valued at approximately $66,636,083.64. This trade represents a 4.59% decrease in their ownership of the stock. The transaction was disclosed in a legal filing with the Securities & Exchange Commission, which is accessible through the SEC website. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, COO Jennifer L. Wong sold 39,167 shares of Reddit stock in a transaction on Monday, May 18th. The stock was sold at an average price of $158.52, for a total transaction of $6,208,752.84. Following the transaction, the chief operating officer owned 1,088,451 shares in the company, valued at approximately $172,541,252.52. This trade represents a 3.47% decrease in their position. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. In the last ninety days, insiders sold 169,141 shares of company stock worth $28,680,845. 28.48% of the stock is currently owned by company insiders.

Key Stories Impacting Reddit

Here are the key news stories impacting Reddit this week:

• Positive Sentiment: Q2 results beat expectations. Reddit reported adjusted EPS of $1.25, versus the $0.95–$0.99 analyst consensus, while revenue rose 61% year over year to $804.9 million, well above the roughly $731 million estimate. Net income reached $253 million, supported by continued user growth and higher advertising revenue. Reddit crushes revenue and earnings estimates, issues strong guidance
• Positive Sentiment: Third-quarter guidance exceeded Wall Street forecasts. Reddit projected revenue of $860 million to $870 million, above the $829.7 million consensus estimate. Management also said AI-powered advertising tools are helping attract marketers and support commercial momentum. Reddit expects revenue above estimates as AI tools attract advertisers
• Positive Sentiment: Analyst sentiment improved. KeyCorp upgraded Reddit to “strong buy,” reflecting confidence in the company’s growth and momentum. Reddit upgraded by KeyCorp
• Neutral Sentiment: Management defended Reddit’s search value. CEO Steve Huffman said Google’s AI Overviews have not yet replaced the value of traditional search links, but the company acknowledged that search-engine referrals have become “choppy.”
• Negative Sentiment: AI-related search disruption overshadowed the earnings beat. Investors are concerned that Google’s AI search features could reduce traffic referrals to Reddit and potentially weaken user growth, engagement, and advertising monetization. Reports also suggested Reddit could reconsider a Google partnership reportedly worth about $60 million annually if search traffic continues to deteriorate. Reddit’s strong quarter fails to lift shares as AI search concerns linger

Institutional Inflows and Outflows

Several hedge funds and other institutional investors have recently bought and sold shares of RDDT. Capital World Investors bought a new stake in shares of Reddit in the 4th quarter valued at about $1,293,258,000. Norges Bank bought a new position in shares of Reddit during the fourth quarter worth about $372,047,000. Invesco Ltd. raised its position in shares of Reddit by 419.0% during the third quarter. Invesco Ltd. now owns 1,487,941 shares of the company's stock worth $342,212,000 after acquiring an additional 1,201,237 shares during the last quarter. State Street Corp lifted its stake in shares of Reddit by 138.5% in the second quarter. State Street Corp now owns 2,030,139 shares of the company's stock worth $305,678,000 after acquiring an additional 1,178,890 shares during the period. Finally, Vanguard Group Inc. lifted its stake in shares of Reddit by 8.9% in the fourth quarter. Vanguard Group Inc. now owns 13,322,048 shares of the company's stock worth $3,062,339,000 after acquiring an additional 1,083,540 shares during the period.

Reddit Price Performance

The company has a fifty day moving average of $176.74 and a 200 day moving average of $165.09. The firm has a market capitalization of $26.43 billion, a P/E ratio of 39.41 and a beta of 1.93.

Reddit (NYSE:RDDT - Get Free Report) last released its earnings results on Thursday, July 30th. The company reported $1.25 earnings per share for the quarter, beating analysts' consensus estimates of $0.95 by $0.30. Reddit had a net margin of 28.60% and a return on equity of 25.48%. The business had revenue of $804.91 million during the quarter, compared to the consensus estimate of $731.00 million. During the same quarter in the prior year, the firm posted $0.45 EPS. The company's revenue for the quarter was up 61.0% compared to the same quarter last year. On average, sell-side analysts forecast that Reddit Inc. will post 4.85 EPS for the current year.

Reddit Company Profile

Reddit is an online social news aggregation, discussion and content-sharing platform organized around user-created communities called "subreddits," each focused on a particular topic or interest. Registered users submit links, text posts, images and video, and community members vote and comment to surface popular content. The site is accessed via its web platform and mobile apps for iOS and Android, and it supports live events such as Ask Me Anything (AMA) sessions and community-driven discussions.

Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit is headquartered in San Francisco and serves a global audience with particularly large user bases in the United States and other English-speaking markets.

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