Reddit stocks have lost significant ground this month, with shares sliding to $143 from a July high of $207. The decline comes as the company confronts falling website traffic, a strained search relationship with Google, and a technical pattern that chart watchers read as a warning sign.
The drop is steeper when measured over a longer stretch. Shares are down 50% from their peak last year, and the company’s market capitalization has shrunk from more than $51 billion to $27.5 billion.
Still, the business behind the ticker is growing fast. Daily users and revenue are both climbing, which sets up a clear tension for investors: strong fundamentals on one side, and weakening traffic, valuation concerns, and bearish technicals on the other.
Why Shares Are Under Pressure
Website traffic is falling
The most direct concern is traffic. SimilarWeb data shows visits to Reddit’s website fell 3.22% to 4.18 billion last month, a decline tied partly to challenges in search.
Reddit has pointed to its relationship with Google as a factor behind the slowdown. Google pays Reddit $60 million a year to use its content to train AI models. According to a recent Wall Street Journal report, Reddit is reconsidering that deal because Google’s AI summaries have been affecting its business.
Management acknowledged the turbulence in the last earnings report but insisted the core business remains healthy. The CEO said:
“Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter, but the bigger picture is unchanged: the commercial business is strong.”
The index inclusion effect is fading
Reddit’s recent addition to the S&P 500 Index has also played a role. Stocks historically tend to rally after joining major benchmarks such as the S&P 500 and Nasdaq 100, but that lift is usually short-lived as momentum fades. The same pattern played out with Robinhood Markets, CoreWeave, and Nebius.
Valuation remains a sticking point
Valuation has weighed on sentiment too. Reddit’s market capitalization peaked at more than $54 billion. The picture has improved since then, but the stock’s forward price-to-earnings ratio of 18 still sits above the sector median of 13.
Analysts Cut Their Price Targets
Those concerns have prompted several Wall Street firms to lower their expectations for Reddit stocks, though all of the revised targets remain above the current share price.
| Firm | Previous Target | New Target |
|---|---|---|
| Morgan Stanley | $240 | $210 |
| JPMorgan | $200 | $185 |
| DA Davidson | $200 | $185 |
The Growth Story Is Still Intact
Users and revenue keep climbing
The operating numbers tell a far more upbeat story than the share price. Daily active users reached 130.3 million, an 18% increase from a year earlier. That user growth fed directly into the top line, with revenue jumping 61% to $805 million. Advertising remains the largest part of the business.
Profitability stood out as well. Gross margin rose to 91.3%, and net income topped $253 million.
| Metric | Latest Figure |
|---|---|
| Daily active users | 130.3 million (up 18% year over year) |
| Revenue | $805 million (up 61%) |
| Gross margin | 91.3% |
| Net income | Over $253 million |
| International revenue | Over $167 million |
Revenue is concentrated in the US
Most of Reddit’s revenue comes from the United States. The international segment contributed more than $167 million.
What analysts expect next
Analysts forecast continued double-digit growth. Annual revenue is expected to rise 53% to $3.4 billion this year, followed by $4.46 billion next year.
What the Chart Is Signaling
A head-and-shoulders pattern near the neckline
On the daily chart, Reddit has formed a head-and-shoulders pattern, a common bearish reversal signal in technical analysis. The stock is now trading near the pattern’s neckline, the level that typically confirms the breakdown if it gives way.
Momentum indicators lean negative
Other indicators point in the same direction. Shares have fallen below both the 50-day Exponential Moving Average (EMA) and the Supertrend indicator, and the two lines of the MACD indicator remain below the zero line.
The $100 downside target
Taken together, these signals suggest the path of least resistance for Reddit stocks is lower. The initial downside target is the psychological level of $100, which would represent a 31% drop from the current price. At the time of the original report, RDDT was quoted at $143.08.
Disclaimer: This content was partially produced with the help of AI tools and This content is for informational purposes only and not investment advice.
