Core Insights - Reddit (RDDT) shares have declined 46.2% in the past month, significantly underperforming the broader Zacks Computer & Technology sector's 2.1% decline and the Zacks Internet - Software industry's 5.3% drop [1][10] Company Performance - Reddit's shares have underperformed compared to peers like Snap (SNAP), Meta Platforms (META), and Pinterest (PINS), with Snap and Pinterest shares down 37.5% and 30.8% respectively, while Meta's shares increased by 6% [2] - The company reported a 75% year-over-year increase in advertising revenues, reaching $690 million in the fourth quarter of 2025, driven by strong user engagement and improvements in Average Revenue Per User (ARPU), which rose 42% year-over-year to $5.98 [6][8] - Daily active users (DAUs) increased by 19% year-over-year to 121 million, and weekly active users (WAUs) grew by 24% year-over-year to 471 million [7] Competitive Landscape - Reddit faces stiff competition from Snap, Meta, and Pinterest, with Snap experiencing a 28% year-over-year increase in total active advertisers due to improved advertising demand [14] - Meta's advertising revenues grew by 24.3% year-over-year to $58.14 billion, accounting for 97.1% of its total revenues in the fourth quarter of 2025 [15] - Pinterest is expanding its advertising capabilities through acquisitions, such as its agreement to acquire tvScientific, enhancing its advertising business on connected TV platforms [16] Valuation and Future Outlook - Reddit's stock is currently trading at a premium Price/Sales ratio of 8.33, compared to the broader sector's 6.54, indicating potential overvaluation [17] - For the first quarter of 2026, Reddit expects revenues between $595 million and $605 million, with a Zacks Consensus Estimate of $614.09 million, reflecting a year-over-year growth of 56.51% [12] - Earnings estimates for the first quarter are pegged at 60 cents per share, indicating a significant year-over-year growth of 361.54% [13]
Reddit Stock Declines 46% in a Month: Should You Buy, Hold or Sell?