Since last Friday, shares of the popular online content forum Reddit (RDDT 4.26%) are trading 14% lower as of 11:38 a.m. ET Thursday. Analysts have grown more bearish on the company's prospects this year, and CEO Steve Huffman sold $15.8 million of stock recently.
Dependence on Google
Reddit's stock has performed extremely well since going public in March of 2024. It exploded from $46 on its first day of trading to a peak of $225 just this February. However, the sell-off has hit it hard. Now trading around $110, the stock is still up nearly 140% since going public. But in recent months, analysts have grown concerned about the company's reliance on Google.
Redburn Atlantic analysts James Cordwell and Joseph Barker wrote in a research note earlier this week, "The strong growth of the past 18 months has been predominantly the result of Google changing its search algorithm to favor Reddit, but there is clear evidence that the boost to traffic and visibility from these changes is hitting a ceiling, with a risk that what Google giveth, it will taketh away."
NYSE: RDDT
Key Data Points
Cordwell and Barker have a sell rating on the stock and a $75 price target. Huffman also sold a chunk of stock, although the sales had been planned and he still holds a significant number of shares.
Are growth concerns priced in?
Some, like Deutsche Bank analyst Benjamin Black, think concerns about Google and growth are more than priced in now with the stock down significantly since early February. Reddit still trades at 36 times forward earnings, so it's not cheap but much less expensive than it once was.
I like the company's platform and think many people find it useful, although monetizing social media platforms is easier said than done. I'm positive on the stock in the long term but think shares will remain volatile in the near term, so understand this before buying.
