TLDR
- Reddit stock dropped 4.6% in midday trading to $245.83, with trading volume down 84% from average
- Multiple analysts updated price targets, with Needham raising theirs from $215 to $300 while Goldman Sachs set $212
- CFO Andrew Vollero sold 30,000 shares at $218.09 average price, reducing his position by 9.55%
- Stock has retreated over 16% from recent highs near $283 following strong Q2 earnings
- Reddit reported record Q2 results with $500M revenue (up 78% year-over-year) and $89M net profit
Reddit shares fell 16% from last week’s highs as the stock continues its retreat from recent highs. The decline came with notably light volume of just 1.2 million shares, representing an 84% drop from the average daily trading of 7.6 million shares.
The social media platform’s stock had surged to $283 following blockbuster second-quarter earnings results. However, sellers have since taken control, pushing shares down more than 16% from those peaks.
Wall Street analysts remain divided on the stock’s direction. Needham & Company raised their price target from $215 to $300 while maintaining a buy rating. Cannonball Research reiterated their buy recommendation in a Tuesday report.
Goldman Sachs maintained a more cautious stance with a neutral rating and $212 price target. Citigroup kept an outperform rating on the shares. Currently, Reddit has an average analyst rating of “Moderate Buy” with a consensus price target of $197.88.
Insider Activity Draws Attention
Company insiders have been active sellers in recent weeks. CFO Andrew Vollero sold 30,000 shares at an average price of $218.09, generating $6.5 million in proceeds. The transaction reduced his holdings by 9.55% to 284,168 shares.
CEO Steve Huffman also trimmed his position, selling 18,000 shares at $223.41 per share. His sale generated over $4 million and represented a 3.51% reduction in his stake. Over the past 90 days, insiders have sold 344,126 shares worth $71.3 million combined.
The timing of these sales coincided with the stock’s run to new highs following earnings. Reddit went public in March 2024 at $34 per share, making the recent trading levels represent gains of over 600% from the IPO price.
Strong Financial Performance Fuels Rally
Reddit’s second-quarter results exceeded expectations across key metrics. Revenue jumped 78% year-over-year to $500 million, driven primarily by an 84% increase in advertising revenue. The company achieved its first quarterly profit of $89 million, a sharp turnaround from prior losses.
Gross margins reached a record 90.8% while operating cash flow strengthened to $111 million. These metrics demonstrate the platform’s improved operating leverage and scalability. The results beat analyst estimates of $424 million in revenue and $0.20 earnings per share.
Daily active users grew 21% to 110.4 million, with more than half now coming from international markets. The company’s expansion into France and Brazil, along with machine translation across 23 languages, helped drive this growth.
Reddit provided third-quarter guidance projecting revenue between $535 million and $545 million. The company expects adjusted EBITDA in the range of $185 million to $195 million, suggesting continued operating leverage.
The stock trades with a market capitalization of $44.45 billion and a price-to-earnings ratio of 215.05. Reddit’s beta of 2.38 reflects the high volatility that has characterized the shares since going public. The 50-day moving average sits at $210.50 while the 200-day average is $150.13.
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