Reddit Inc. ($RDDT) is facing a stark warning from Redburn Atlantic, which has initiated coverage with a “Sell” rating and a price target of $75 per share—implying a potential 40% downside from its latest close.
The bearish call, announced on March 17, 2025, comes amid growing concerns about Reddit’s growth sustainability, its heavy reliance on Google Search traffic, and its advertising-driven revenue model, which Redburn believes could mirror challenges seen in Twitter’s ad struggles.
Why Redburn Is Skeptical
- Google Dependency: Redburn analysts point to Reddit’s overreliance on Google Search as a key driver of user acquisition. They warn that this “short-term advantage” could quickly erode as Google updates its algorithms, risking a significant decline in traffic.
- Ad Business Concerns: Reddit’s advertising model is under scrutiny. Redburn draws comparisons with Pinterest and Twitter, suggesting Reddit may struggle to scale its ad revenue effectively—especially given its premium valuation.
- Valuation Worries: Reddit’s forward P/E ratio of 183.64 and debt-to-equity ratio of 1.253 underscore its lofty valuation and complex financial footing.
Reddit’s Stock Performance
- Last Close: $128.21
- March 17 Open: $123.62
- Current (as of 11:31 EDT): $123.04
- Day Range: $119.93 – $126.00
- 52-Week Range: $37.35 – $230.41
Despite the pessimism, other analysts remain divided, with a mean target price of $202.10—highlighting a wide range of opinions about Reddit’s future.
Bottom Line
Redburn Atlantic’s grim outlook on Reddit’s future points to significant risks surrounding its growth strategy and monetization efforts. The firm warns investors to be cautious, as Reddit’s dependence on external factors like Google Search and the ad market may limit its ability to sustain recent gains.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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