Key Takeaways
- Reddit shares fell 25% today on weak fourth-quarter guidance and a sharp drop in search referral traffic.
- Third-quarter revenue still grew 53% even as U.S. daily users fell 2%.
- Alphabet’s search queries grew at their fastest pace in five years and Pinterest’s users hit a record, so the traffic slide looks like Reddit’s own problem.
- The stock already traded at its lowest forward multiple in a year, too low for a company guiding to about 40% growth.
Reddit (RDDT) stock is down 25% today. Its third quarter beat estimates, but its guidance didn’t.
The bigger worry is Google. Reddit’s shareholder letter said search referral traffic was “down meaningfully” in the third quarter, “with the decline accelerating later in the quarter.” That’s traffic Alphabet (GOOG) used to send Reddit’s way. Pinterest (PINS), which also reported Thursday evening, doesn’t seem to have the same problem.
Fewer users, more money
Revenue rose 53% to $895 million even as U.S. daily users fell 2% to 50.7 million, because U.S. revenue per user jumped 53%. Quarterly revenue has more than doubled since the end of 2024:
The U.S. loss came from logged-out visitors, down 4%, while logged-in U.S. users rose 1%. Reddit says logged-in and app users bring in “over 80% of the monetization.”
TIKR tracks 34 analysts on Reddit. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Reddit, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Reddit’s Analyst Ratings
Google keeps the click
Fourth-quarter revenue guidance of $1.00-$1.03 billion fell short of the $1.05 billion consensus. Reddit also warned that daily users “could fall in Q4, by a low-double-digit percentage” from 130 million.
On Wednesday, Alphabet said Google’s search query growth was its highest in five years, with Search & other revenue up 12% to $63.4 billion. People are searching more than ever, and more of those searches end on what Reddit’s letter calls “an AI-powered destination itself.” That’s a win for Alphabet, and Reddit has to make up the lost traffic through its app.
Pinterest missed estimates too. But its shortfall came from European cross-border sellers pulling back, and its monthly users hit a record 661 million, up 10%. Its users show no sign of Reddit’s traffic slide.
Priced for a lot of doubt
Reddit’s forward P/E was already at its lowest point of the past year:
It closed Thursday at 15x, against a 26x one-year average. At today’s price, it’s about 12x.
My take: that’s too much doubt for a company still guiding to 38%-42% revenue growth, with a 41% free cash flow margin and $3.0 billion of cash. I think the selloff overshoots.
Of course, if daily users fall by double digits and logged-in users stop growing, today’s price won’t look cheap.
So what is Reddit stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Reddit could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
