Shares of Reddit (RDDT) are down 18% after the social media company known for its online message boards reported a user numbers that fell short of expectations.
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The disappointing user numbers overshadowed what was otherwise a strong print for the fourth-quarter of 2024. The San Francisco-based company reported earnings per share (EPS) of $0.36, which was well ahead of the $0.24 expected on Wall Street.
Revenue in the October through December quarter totaled $428 million, which beat the $405 million that was anticipated among analysts. Sales were up 71% from a year earlier. Global daily active users on Reddit’s platform rose 39% from a year ago to 101.7 million in Q4 2024. Unfortunately, that figure was below the 103.1 million consensus estimate of analysts, sending RDDT stock lower in after hours trading.
Blame Google?
Management at Reddit blamed the miss on its daily active users to a change in Google’s (GOOGL) search algorithm, which apparently impacted user growth in the quarter. Reddit CEO Steve Huffman said that the company’s search-related traffic has since recovered in the current first quarter.
Reddit has benefited in the past from Google search updates and internal site improvements that have helped it gain new and returning users. Management at Reddit also offered positive forward guidance, saying they expect first-quarter sales of $360 million to $370 million, which is ahead of the average analyst estimate of $358 million.
Before today (Feb. 12), RDDT stock had increased 370% over the last 12 months.
Is RDDT Stock a Buy?
Reddit stock has a consensus Moderate Buy rating among 19 Wall Street analysts. That rating is based on 12 Buy, six Hold, and one Sell recommendations issued in the last three months. The average RDDT price target of $190.17 implies 12.15% downside risk from current levels. These ratings are likely to change after today’s financial results.
