Reddit's 50% Stock-Price Plunge Fails to Entice Buyers as Growth Slows

Though it's stock price is still up 200% from its IPO in March of 2024
— last week Reddit's stock had dropped nearly 50% since February 7th.

And then this week, it dropped another 10%, reports Bloomberg, citing both the phenomenon of 'volatile technology stocks under pressure' — but also specifically 'the gloomy sentiment around Reddit...'

The social media platform has struggled to recover since an earnings report in February showed that it is failing to keep up with larger digital advertising peers such as Meta Platforms Inc. and Alphabet Inc.'s Google, which have higher user figures. Reddit's outlook seemed precarious because its U.S. traffic took a hit from a change in Google's search algorithm.

In recent weeks, the short interest in Reddit — a proxy for the volume of bets against the company — has ticked up, and forecasts for the company's share price have fallen. One analyst opened coverage of Reddit this month with a recommendation that investors sell the shares, in part due to the company's heavy reliance on Google. Reddit shares fell more than 5% in intraday trading Friday. 'It's been super overvalued,' Bob Lang, founder and chief options analyst at Explosive Options said of Reddit. 'Their growth rate is very strong, but they still are not making any money.' Reddit had a GAAP earnings per share loss of $3.33 in 2024, but reported two consecutive quarters of positive GAAP EPS in the second half of the year...

At its February peak, Reddit's stock had risen over 500% from the $34 initial public offering price last March. Some of the enthusiasm was due to a series of deals in which Reddit was paid to allow its content to be used for training artificial intelligence models. More recently, though, there have been questions about the long-term growth prospects for the artificial intelligence industry.
'On Wall Street, the average price target from analysts has fallen to about $195 from $207 a month ago,' the article points out. 'That still offers a roughly $85 upside from where shares closed following Thursday's 8% slump...'

Meanwhile Reuters reported that more than 33,000 U.S. Reddit users experienced disruptions on Thursday according to Downdetector.com. 'A Reddit spokesperson said the outage was due to a bug in a recent update, which has now been fixed.'

Read more of this story at Slashdot.