Reddit, Inc. (NASDAQ:RDDT) finds itself at a pivotal moment, facing contrasting trends following notable shifts among its investors and stock performance. Recently, Gale Mary Porter, director at Reddit, sold 20,000 shares of Class A Common Stock on February 21, 2025, for around $3.39 million, as the stock has faced considerable volatility—with a recent 15.6% decline weighed against a remarkable 217% increase over the past year.
Following the sale, Porter retained ownership of 26,309 shares, signaling strategic financial maneuvering amid market uncertainties. Analysts are also weighing in on Reddit’s outlook, reflecting the complexity of guest engagement metrics and profitability. For example, Piper Sandler highlighted strong user engagement and raised its price target to $220, maintaining an Overweight rating. Conversely, BofA Securities adjusted its target to $190, recognizing Reddit’s performance but hinting at concerns due to surprisingly small revenue margins.
Further illustrating the mixed sentiments, Bernstein SocGen reaffirmed its Underperform rating with a bearish price target of $150, primarily due to increased competition within digital advertising and user engagement challenges. Meanwhile, JPMorgan has increased its price target to $185, emphasizing Reddit's progress and ad revenue growth, indicating perseverance amid difficulties.
The stock witnessed drastic fluctuations, dropping 26% since February 10, 2025, when it peaked at $230.41. This decline followed disappointing user growth reported post-earnings and a staggering $70.5 million share sale by CEO Steve Huffman, unsettling many investors. Nevertheless, Huffman reassured stakeholders, stating, “Traffic has rebounded significantly since the last quarter,” which raises questions about whether the market's reaction has been excessively pessimistic.
Interestingly, the decline has not deterred hedge funds from entering the fray. According to recent 13F filings, 478 funds now hold positions in Reddit—an impressive 69% increase from the previous quarter—indicating growing confidence among institutional investors. Notable players like Tiger Global, Renaissance Technologies, and Citadel Advisors have been increasing their stakes, showcasing their belief in Reddit's long-term potential.
Adding to this bullish outlook, hedge funds have ramped up their positions considerably, with call options surging by 575% during the fourth quarter of 2024. This indicates many funds are betting on a rebound, even amid broader selloffs, as put option positions only saw minimal growth at 25% during the same quarter.
From a technical analysis standpoint, Reddit's stock indicates some caution, trading below its eight-, 20-, and 50-day simple moving averages, with the Relative Strength Index (RSI) settling at 31.51—a bearish signal. Nonetheless, the 200-day moving average at $103.75 hints at a more resilient long-term support level.
Looking forward, Reddit’s prospect shines through its strategic focus on international expansion, innovations within advertising technologies, and prospective AI data licensing agreements. These initiatives, including partnerships with giants like OpenAI, have potential to reignite investor confidence and catalyze growth.
Analysts project first-quarter revenues to grow nearly 50%, alongside significant enhancements in adjusted EBITDA expected to skyrocket 700% to 800%. Despite the current slump, the potential remains evident, prompting some analysts to view this period less as a red flag and more as a temporary reset.
For investors unafraid of volatility, this might just represent the ideal opportunity to buy back in. With mixed signals swirling around Reddit's financial health, one thing remains clear: the coming months will be pivotal for the social media titan as it attempts to navigate these choppy waters and regain investor trust.