Reddit Stock Is Trading Lower Thursday: What's Going On?

Reddit Inc RDDT shares are trading lower Thursday on the heels of the company’s fourth-quarter financial results. The stock is off the lows of the session after multiple analysts raised price targets following the print.

• Q4 Revenue: $427.71 million, versus estimates of $405.26 million

• Q4 EPS: 36 cents, versus estimates of 25 cents

Total revenue was up 71% on a year-over-year basis. Daily active unique users (DAUq) increased 39% year-over-year to 101.7 million. U.S. daily actives declined on a quarter-over-quarter basis from 48.2 million to 48 million. Weekly actives users totaled nearly 380 million in the quarter. 

The daily actives number appears to be weighing on shares. In a letter to shareholders, Reddit said it experienced “some volatility with Google Search triggered by a periodic algorithm change.” The company noted that traffic from search has regained momentum in the first quarter. 

“What happened wasn't unusual—referrals from search fluctuate from time to time, and they primarily affect logged-out users. Our teams have navigated numerous algorithm updates and did an excellent job adapting to these latest changes effectively,” the company said. 

Reddit generated an operating cash flow of $90 million and free cash flow of $89.2 million in the quarter. The company ended the quarter with cash and cash equivalents of $1.84 billion.

“It was another strong quarter as we accomplished exciting milestones across revenue and international growth,” said Steve Huffman, co-founder and CEO of Reddit. 

“However, what’s most exciting is still ahead. We’re focused on providing a best-in-class experience for finding community and trusted information, proving that Reddit is for everyone, everywhere.”

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Reddit expects first-quarter revenue to be in the range of $360 million to $370 million versus estimates of $358.08 million. The company sees first-quarter adjusted EBITDA of $80 million to $90 million.

Analyst Changes:

• Morgan Stanley analyst Brian Nowak maintained Reddit with an Overweight and raised the price target from $200 to $210.

• Baird analyst Colin Sebastian maintained Reddit with a Neutral and raised the price target from $160 to $185.

• Needham maintained a Buy rating on Reddit and raised the price target to $220

• BofA Securities analyst Justin Post maintained Reddit with a Neutral rating and raised the price target from $180 to $190.

RDDT Price Action: Reddit shares were down 6.80% at $201.60 at the time of publication Thursday, according to Benzinga Pro.

Photo: Shutterstock.