Wall Street Expresses Concerns Over Reddit's High User Growth But Low Share Value

By Thea Felicity

Apr 15, 2024 12:49 PM EDT

Traders work on the floor of the NYSE after the opening bell as Reddit begins trading on the New York Stock Exchange (NYSE) in New York on March 21, 2024. Reddit, under the NYSE ticker "RDDT," will be made public at $34 a share, the company said in a statement March 20, which would value the platform at around $6.4 billion.
(Photo : TIMOTHY A. CLARY/AFP via Getty Images)

Top Wall Street brokerages have initiated coverage of Reddit, expressing doubts about the social media platform's user growth despite optimism regarding its ad revenue and use of artificial intelligence (AI), according to Reuters.

"DAUq (daily active unique users) growth has accelerated in recent quarters and there is meaningful headroom for growth, but for now Reddit's base of 73 million users is relatively sub-scale," noted J.P. Morgan analysts led by Doug Anmuth. 

READ NEXT: Redditors Became Instant Millionaires As Company's Stock Soars 48% During Stock Exchange Debut

They estimated DAUq to hit 109 million users by 2026, but these figures still lagged behind peers like Meta Platforms and Elon Musk's ventures. "Reddit needs to prove it can meaningfully scale over time," they emphasized.

Goldman Sachs and J.P. Morgan started with a "neutral" rating and price targets of $40 and $47, respectively, while Morgan Stanley opted for an "equal-weight" rating with a $45 target. 

However, Reddit's shares, currently trading at $40.66, fell below last month's debut price of $47, prompting concerns about its scalability. During its Initial Public Offering, VCPost reported a 48% surge in company stocks, although experts were not truly convinced of its stability.

Analysts highlighted Reddit's base of 73 million users as relatively small compared to peers like Meta Platforms and Elon Musk's ventures, emphasizing the need for substantial growth. Despite bullish sentiments from some brokerages, skepticism persists regarding Reddit's profitability and ability to attract a larger user base.

READ MORE: Reddit History Timeline: From $100K to $6.4 Billion Dollar Company

© 2024 VCPOST, All rights reserved. Do not reproduce without permission.

Join the Conversation

Real Time Analytics