Reddit Stock Plummets 19% Post-Earnings, Despite Recovering Google Traffic

Reddit (RDDT) has experienced a significant decline of approximately 19% in stock value since its earnings report last week. This setback follows a six-month surge that quadrupled share prices.

Key Takeaways:

* Reddit's earnings per share exceeded estimates.
* Daily active users declined due to a Google Search algorithm change.
* CEO Steve Huffman's recent stock sale of $70.5 million raised concerns.
* The FTC's inquiry into platform policies may have contributed to the stock's drop.
* Despite the recent decline, Reddit stock remains up nearly 220% year-over-year.

Analysis:

CEO Huffman indicated that Google Search traffic has rebounded in the first quarter. However, shares fell 5% on the following trading day and have continued to decline. Huffman's substantial stock sale may have also weighed on investor sentiment.

Additionally, Reddit's policies on banning users for certain content have become the subject of scrutiny by the US Federal Trade Commission. This inquiry may have further impacted the stock's performance.

Analyst Outlook:

Despite the recent drop, most Wall Street analysts maintain Buy ratings on Reddit stock. JMP Securities analyst Andrew Boone highlights the "very elevated buyside expectations" prior to the company's recent earnings report.