Key Takeaways
- Reddit shares fell 34% in a week on weak fourth-quarter guidance and a warning that daily users could fall by a low-double-digit percentage.
- CEO Steve Huffman blames AI Mode on Alphabet’s Google, which keeps more searchers on Google itself.
- Reddit is mostly losing logged-out visitors, while its logged-in users are still growing.
- The stock looks cheap if logged-in users keep growing, and the fourth-quarter report is the next test.
Reddit (RDDT) stock fell 34% in the five trading days through Monday, Nov. 2, after a third-quarter report that paired 53% revenue growth with a warning about its users.
The problem is Google. Alphabet (GOOG) is answering more searches with AI on its own pages, and fewer of those searchers reach Reddit.
A fine quarter with a short guide
Revenue rose to $895 million, with a 41% free cash flow margin. But fourth-quarter guidance of $1.00-$1.03 billion fell short of the $1.05 billion bar.
U.S. daily users fell 2% from a year earlier, and Reddit told shareholders search referral traffic was “down meaningfully in Q3, with the decline accelerating later in the quarter.” If October’s pace holds, total daily users could fall by a low-double-digit percentage this quarter.
Analysts still expect normalized EPS to more than double from 2025 to 2027:
Those estimates have only started to come down, and a guide below on what they assumed argues for more cuts.
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
Huffman blames AI Mode
On Reddit’s Oct. 29 earnings call, founder and CEO Steve Huffman said Google is “crawling us as hard as ever,” so the drop isn’t about demand for Reddit’s content. “The reality is the AI Mode does not drive traffic. Not for us, and not to anybody as far as I know.”
Alphabet’s stock fell 11.5% over the same five sessions, after its Oct. 28 report missed on earnings and showed free cash flow turning negative on heavy AI spending. Google’s query growth was its fastest in five years, but Search & other revenue growth slowed to 12%, at $63.4 billion. More of those searches just end on Google.
So Huffman is betting on people who come to Reddit on purpose: “Google is teaching people that if you want to come to Reddit, you need to come to Reddit.”
U.S. logged-out visitors fell 4% from a year earlier while logged-in users rose 1%, and logged-in and app users bring in over 80% of Reddit’s monetization.
Cheap, if the logged-in users hold
Evercore ISI cut the stock to In Line and Loop Capital cut it to Hold, while Citi kept its Buy rating even as it lowered its target to $186 from $245.
Reddit’s forward P/E has fallen to about 11x, against a 26x one-year average:
The risk is Google, which sent roughly half of Reddit’s traffic a year ago, per management, and BofA flags the data-licensing renewal due in early 2027.
Still, 11x is cheap for a business this profitable, with $3.0 billion of cash and securities, as long as the users who pay the bills keep showing up. The fourth-quarter report will show whether they do.
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!
