New Street Research Predicts Reddit Could Experience a Nearly 10% Decline

Welcome to Extreme Investor Network, where we bring you the latest insights and analysis on the world of investing. Today, we want to talk to you about Reddit, the popular social media company that recently made its public market debut.

According to New Street Research, Reddit could be facing some challenges ahead after its strong debut on the stock market. The firm initiated coverage of Reddit with a neutral rating and a $54 per share price target, implying nearly 10% downside from the previous closing price. This makes New Street the first on Wall Street to issue a stock rating on Reddit.

Reddit went public after pricing its initial public offering at $34 per share and saw a 48% jump in its stock price on the first day of trading. The company’s IPO marked the first major social media company to go public since Pinterest in 2019.

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Analyst Dan Salmon highlighted some key factors that could impact Reddit’s stock performance, including a potential data licensing deal with OpenAI, growth in daily active users, and advertising metrics. He also noted that Reddit’s ad revenue is currently “top heavy,” with the top 10 advertisers on the platform accounting for 26% of revenue.

Looking ahead, Salmon believes that high margin data licensing and direct response advertising will drive operating leverage for Reddit in the mid to long term. He also pointed out that expense growth has slowed, thanks to operating efficiencies put into place throughout 2023, and that Reddit is focused on improving leverage over the long term.

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As investors, it’s essential to consider all these factors when evaluating Reddit as a potential investment opportunity. Stay tuned for more updates and analysis from Extreme Investor Network as we continue to track the latest developments in the financial markets.

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