What Happened?
Shares of online community and discussion platform Reddit (NYSE:RDDT) fell 9.1% in the afternoon session after a report from an RBC analyst highlighted "challenging" feedback from advertising agency checks concerning small and medium-sized businesses.
The analyst noted that while the broader environment seemed positive for giants like Google and Meta, the outlook was "less positive" for Reddit. This news raised concerns about the company's ability to attract advertising dollars, a key source of its revenue. Adding to the pressure, the news aggregator Digg was relaunched as a direct competitor. Notably, Digg's relaunch was led by its original founder and a co-founder of Reddit, Alexis Ohanian. The new platform aimed to tackle misinformation and spam, and was even hiring Reddit moderators as advisors, presenting a new challenge to Reddit's user base and community structure.
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What Is The Market Telling Us
Reddit’s shares are extremely volatile and have had 60 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 4.4% on the news that Evercore ISI initiated coverage of the social media company with an "Outperform" rating and a $320 price target.
The price target represented about 30% upside from the stock's previous trading price. In its report, the analyst noted that the platform had more room to turn its user engagement into revenue. Evercore ISI projected a strong growth profile for Reddit, forecasting a three-year revenue compound annual growth rate of 30%-40%. This outlook was supported by the company's development of new AI features and more advanced ad products, which were expected to fuel its expansion.
Reddit is down 6.3% since the beginning of the year, and at $226.76 per share, it is trading 16.2% below its 52-week high of $270.71 from September 2025. Investors who bought $1,000 worth of Reddit’s shares at the IPO in March 2024 would now be looking at an investment worth $4,496.
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