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Reddit Shares Drop From $68 to $49

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Reddit Shares Drop From  to

Author: Douglas A. McIntyre

The Reddit Inc. (NYSE: RDDT) initial public offering, which was priced at $34 a share, opened at $47, rose to $57.80, and closed at $50.44 on the first day of trading. Now, it appears the stock will fall again after slipping below $50 at the close of last week.

With the company’s $7.8 billion market cap, the current valuation is hard to defend. Last year, Reddit lost $91 million on revenue of $804 million. And revenue is not red hot. It rose only 21% compared to 2022. The revenue is also extremely small for a social media company founded in 2005, just one year after behemoth Facebook was started.

The value of major social media companies can move in opposite directions. Many investors have marked down the value of X, which is privately held. On the other hand, the shares of Facebook’s parent, Meta Platforms Inc. (NASDAQ: META) are up 37% so far this year, while the S&P 500 is 10% higher. (Meta stock price prediction in 2030: Bull, base, and bear forecasts.)

Where Do Reddit Shares Go From Here?

Where do Reddit’s shares go from here? Very likely downward. On Reddit’s first day of trading, trading firm Hedgeye Risk Management said it expected the stock to move 50% lower, bringing the market cap to $4 billion. That is still five times 2023 revenue, which is rich for a company that loses money and has mediocre top-line growth.

One challenge for Reddit investors is that it will release earnings for the first time in late May. In the meantime, it is hard to say how to value the company. It is often compared to Instagram, X, TikTok, and Facebook.

Almost two months is a long time for investors to wait until they see earnings. In the meantime, they can only speculate. That, as much as anything else, will cause continued volatility.


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The post Reddit Shares Drop From $68 to $49 appeared first on 24/7 Wall St..

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