Reddit Stock Plunges 19% Post-Earnings, Despite CEO's Assurance
Reddit (RDDT) shares have plummeted 19% since its earnings release last week, following a six-month rally that saw the stock quadruple in value.
Despite surpassing earnings per share estimates, Reddit reported declining daily active users due to a change in Google's Search algorithm that affected website traffic.
CEO Steve Huffman expressed optimism during a call last Wednesday, stating that traffic from Google Search had recovered and was "regaining momentum." However, the stock fell 5% in the subsequent trading day and has continued to decline.
The recent loss is the largest five-day drop for RDDT since April 2024. On Tuesday, Huffman and his trust sold $70.5 million worth of Reddit shares, marking the CEO's largest sale to date.
Additionally, Reddit shares fell 7.5% on Thursday following an inquiry from the US Federal Trade Commission regarding platform policies that prohibit users for specific content.
While the stock's decline has erased most of its year-to-date gains, RDDT remains 220% above its value six months ago. Investors remain optimistic due to the platform's growing advertising revenue and partnerships with AI companies like OpenAI.
Most Wall Street analysts maintain their "Buy" ratings for Reddit stock, acknowledging "elevated buyside expectations" before the recent earnings report.