Research firm Hedgeye Research (RDDT) as a new short idea on Wednesday, sending the newly listed company’s shares tumbling more than 10% at the market open.
After nearly doubling in value after its IPO last week, analysts said that "the hype surrounding Reddit is 'starting to wear off,'" leading to their assessment that the stock is "grossly overvalued" at its current price.
Analysts anticipate Reddit's first-quarter results to display "positive fundamental momentum."
However, they also predict a notable deceleration in both user engagement and revenue growth during the latter half of 2024 and the first half of 2025, potentially affecting the stock negatively.
According to analysts, there's a possible "50% downside" from its IPO price of $47.
RDDT closed Tuesday trading at $65.11, marking a 92% surge since its first trading day on the New York Stock Exchange. This was the biggest social media IPO since Pinterest’s debut in 2019.