Social media stock Reddit (RDDT) has fallen dramatically from February and is one of those companies readers need to mark down as one to buy at a discount.
Even though the stock has more than halved, this platform is one that has made major inroads into the cultural and social fabric of English language discussion.
It is true in the short-term, it is facing tough comparisons to the bigger giants like Facebook, Instagram, and Snap.
There is clear evidence that the boost to traffic and visibility from Google’s (GOOGL) changes is hitting a ceiling, with a risk that we are entering a period of diminishing returns.
Reddit's daily active user growth will slow to 19% in 2025.
Google’s expanded relationship could turn on a dime and that looks like the likely outcome here.
Google’s search algorithm is not adding as many Reddit subscribers as it used to.
Reddit is not a behemoth, but everybody in Silicon knows this company.
The mid-term problem for Reddit boils down to the lack of profitability.
When you consider that the weakness in Reddit has coincided with a brutal macro-induced selloff, then Reddit is starting to crawl back into an attractive zone for long-term buy-and-hold investors.
When this tariff chaos starts to calm down, I do believe Reddit stock will turn sharply higher.
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.
Remember that Reddit is in the early stages of executing on a robust, multi-year user and monetization growth opportunity.
There is also the potential to add many other non-English language markets.
Reddit’s shares are extremely volatile and have had 66 moves greater than 5% over the last year.
There is also the critical issue of investors not knowing the company well enough because Reddit’s brand is still way too small.
The diminutive stature of Reddit’s brand footprint has translated into less marketing interest.
Smaller companies are susceptible to the whims of Google Search and Amazon e-commerce.
These types of bigger companies can stifle growth by becoming too reliant on search results making Reddit.com harder to find.
Surely, investors wouldn’t believe it is realistic if the stock continued its rise peaking at $230 per share.
The comedown has been remarkable, but to be honest, many other tech stocks have been beaten up pretty good too lately.
Reddit needs to fall another $20 and then I would say that is a great entry point into an upstart social media stock.
In the meantime, the global trade fights continue to hog center stage.
Pessimism continues to grow in the US, but we still haven’t hit a recession.
