Reddit (RDDT) stock has lost roughly 23% since its earnings report last week, coming off a six-month rally that saw shares quadruple.
The social media platform, which went public nearly a year ago, last week reported its fiscal fourth quarter earnings. Though earnings per share surpassed estimates, Reddit daily active users fell from the prior quarter due to a change in Google’s Search algorithm that hurt traffic to the site.
CEO Steve Huffman told analysts in a call last Wednesday that traffic from Google Search has recovered in the first quarter and “regained momentum.”
Shares fell 5% in the next trading day and have continued to plummet over the past week. The stock’s 19% five-day loss was the largest decline over that time period since April 2024.
Huffman and his trust sold roughly $70.5 million worth of Reddit shares Tuesday, according to SEC filings — by far the largest stock sale by the chief executive to date. For comparison, prior to Feb. 18, Huffman’s largest Reddit stock sale was 1,400 shares worth $2.8 million on Jan. 31.
Additionally, Reddit shares on Thursday declined 7.5% as the US Federal Trade Commission filed an inquiry into tech platforms for policies that ban users for certain content. Reddit’s policies can ban users if they bully or harass users or post sexually explicit and abusive content.
While Reddit stock’s drop has erased most of its gains year to date, the stock is still up nearly 220% from six months ago. Investors have seized on the platform’s surging advertising revenue and growing deals with big AI companies such as OpenAI, in which Reddit licenses its data (i.e., user posts) to train their artificial intelligence models.
Most Wall Street analysts have maintained their Buy ratings on Reddit stock, with JMP Securities analyst Andrew Boone noting “very elevated buyside expectations” before the company’s recent earnings report.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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