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 (NYSE:RDDT) 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.