- Reddit’s (RDDT) stock climbed 14.39% to $122.73 on Tuesday, recovering from a three-day slump, though it remains down 23% over five sessions, likely bolstered by Loop Capital’s ‘Buy’ rating and view of its 43% monthly drop as ‘excessive’.
- The company’s Q4 sales rose 71% year-over-year to $428 million, the fastest growth since 2022, despite a 15% February drop due to weaker user numbers from a Google search change.
- Loop Capital’s Alan Gould highlighted Reddit’s near seven-fold rise from its $34 IPO to a $230 peak in under a year, arguing it has the “biggest upside potential” in his coverage due to strong 2024 performance and future growth prospects like advertising and data licensing.
Reddit’s (RDDT) stock surged 14.39% on Tuesday, closing at $122.73, a sharp rebound from a three-day slide that mirrored a broader tech sector downturn, driven by fears of President Trump’s tariffs and recession concerns. This gain, however, fails to fully offset a 23% loss over the past five sessions, reflecting the volatile sentiment surrounding the social media platform. The uptick was likely fueled by a bullish note from Loop Capital’s managing director Alan Gould, who, and as reported by CNBC, reaffirmed a ‘Buy’ rating and labeled Reddit’s shares “extremely attractive” after a 50% drop in the past month, which he deemed excessive. Gould highlighted Reddit’s standout performance, noting its stock soared nearly seven-fold from its $34 IPO price to a peak of $230 in under a year, driven by exceptional 2024 results that outpaced both his and Wall Street’s expectations.
Despite the recent rally, Reddit’s path has been rocky, with a more than 15% drop in February triggered by disappointing Q4 user numbers tied to a Google search algorithm change that disrupted its traffic. Though the company claimed recovery from this shift, the miss rattled investors, contributing to a downward spiral alongside tech giants like Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA), as the Nasdaq (^IXIC) saw its steepest decline since 2022, with the seven largest tech firms shedding over $750 billion in market value on Monday alone. Yet, Reddit’s fundamentals remain robust, with Q4 sales jumping 71% year-over-year to $428 million – the fastest quarterly growth since 2022 – bolstered by enhanced advertising tools and emerging data licensing opportunities.
Gould acknowledged the prevailing “risk-off market environment” but argued Reddit’s long-term potential justifies its revaluation, pointing to its ability to narrow the average revenue per user (ARPU) gap and capitalize on future growth. Even with its recent 43% tumble, he sees Reddit as having the “biggest upside potential” among his coverage universe, a view underpinned by its year-long track record as a top performer, despite the tech sector’s current turbulence. Tuesday’s 14.39% climb to $122.73 signals renewed investor interest, but Reddit’s trajectory hinges on sustaining this momentum amid macroeconomic headwinds.
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