Reddit Stock Drops: Walmart's Guidance and X's Funding Round Spark Concerns

Reddit, Inc. (RDDT) stock took a hit last week, dropping 9.4% amid broader market declines and concerns about the company's growth prospects. The social media platform's share price fell despite strong Q4 results, with analysts maintaining a "Buy" rating and upgrading price targets. Let's dive into the factors contributing to Reddit's stock decline and explore the company's recent financial performance and growth trajectory.



Reddit's stock price decline can be attributed to a combination of macroeconomic concerns raised by Walmart's sales guidance and the latest funding round for X (formerly Twitter). Walmart's guidance for slower sales growth in 2025 compared to 2024 raised concerns about the overall state of the U.S. consumer economy, which could translate to weaker ad revenue for Reddit. Additionally, investors may be assigning lower valuation multiples to Reddit stock, contributing to its decline.

The latest funding round for X, valuing the company at $44 billion, raised concerns for Reddit investors. X is believed to have significantly more active users than Reddit, and its platform monetizes at higher levels per user. This could lead investors to question Reddit's valuation, which is currently around $31 billion, and its ability to grow and compete with other social media platforms.



Despite these factors, Reddit's recent financial performance and growth trajectory remain strong. The company reported a 61.71% increase in revenue in 2024 compared to the previous year, reaching $1.30 billion. However, the company also reported a significant loss of -$484.28 million in 2024, which was 433.2% more than in 2023. This loss may be attributed to increased investments in growth and innovation, as well as the impact of macroeconomic factors on advertising revenue.

Reddit's user base and engagement metrics have evolved significantly over time, driving the company's valuation and stock performance. As of 2024, Reddit has over 500 million accounts, an increase of over 150 million since 2019. The number of daily active users (DAUs) has grown from 54.8 million in Q1 2021 to 97.2 million in Q3 2024, a 77.7% increase. Weekly active users (WAUs) have grown from 201.9 million in Q1 2021 to 365.4 million in Q3 2024, a 76.1% increase.

Reddit's strong user base growth and engagement metrics have contributed to its increasing valuation. As of 2024, the company has a market capitalization of roughly $31 billion, up from $10 billion in 2021. The company's stock price has also benefited from these trends, with analysts predicting a 3.61% increase from the current stock price of $166.40 to an average target price of $172.41.

In conclusion, Reddit's stock price decline last week was influenced by macroeconomic concerns and the latest funding round for X. However, the company's recent financial performance and growth trajectory remain strong, driven by its user base growth and engagement metrics. As Reddit continues to grow and engage its user base, investors can expect these trends to play a crucial role in the company's future success.