Following its IPO, Reddit Inc (NYSE:RDDT) has faced skepticism from U.S. brokerages regarding its profitability and the risk of becoming a ‘meme stock.’
Since its inception in 2005, Reddit has yet to report an annual profit, and its stock price has dropped below the initial offering price of $47, last trading down at $45.88.
Bernstein and Baird were among the first to issue ratings. Bernstein assigned an ‘Underperform’ rating and a $40 price target, citing concerns over Reddit’s engagement metrics and content nature, Reuters reports.
Meanwhile, Baird gave a ‘Neutral’ rating with a $50 target, noting Reddit’s robust user community and potential for margin growth.
The platform’s fame surged in 2021 during the ‘meme-stock’ phenomenon, spearheaded by its “Wallstreetbets” forum, which led to massive buys in stocks like GameStop.
In March, Reddit marked its highly anticipated debut on the public markets, highlighting the first significant IPO of 2024. The company set its initial public offering price at $34 per share.
In an unusual move, Reddit reserved 8% of its IPO shares for its users, moderators, board members, and employees’ relatives.
Despite predicted first-quarter operating profits significantly increasing, Bernstein analysts remain cautious. They label Reddit an “institutional meme stock” and doubt the platform’s advertising and profit growth promises.
The stock has lost over 9.2% since its IPO.
Price Action: RDDT shares traded higher by 0.48% at $45.56 premarket on the last check Friday.
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