RDDT Stock On Track For Worst Single-Day Drop Ever — Analysts Cut Targets Over Google Search Traffic Concerns

• Reddit’s U.S. daily active users declined 2% year over year to 50.7 million, while global users reached 130.3 million, missing expectations.
• The company forecast fourth-quarter revenue of $1 billion to $1.03 billion, below Street's $1.05 billion estimate.
• Reddit plans to test a primarily logged-in experience in select international markets during the fourth quarter to improve engagement.

Reddit (RDDT) stock is on track for its worst single-day decline since its March 2024 market debut, as a wave of analyst downgrades and price-target cuts followed the company's third-quarter earnings report.

Analysts warned that declining Google search referrals could threaten Reddit's user growth and future advertising revenue, despite stronger-than-expected quarterly earnings.

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At the time of writing, RDDT shares had plunged more than 22%. Reddit was also among the top-trending tickers on Stocktwits.

Analysts Downgrade Reddit, Slash Price Targets

According to TheFly, Oppenheimer downgraded Reddit stock, citing uncertainty around the company's proposed shift toward a logged-in experience and its relationship with Google (GOOG, GOOGL).

KeyBanc downgraded the stock, warning that worsening search traffic could affect revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) expectations for 2027 and 2028.

Meanwhile, Needham halved its price target but maintained a ‘Buy’ rating, citing concerns about sustained declines in search traffic. Wells Fargo lowered its target, noting that Google's accelerated AI Overviews rollout could further pressure traffic. 

According to the note cited by TheFly, BofA reduced its target, expecting subdued sentiment until U.S. logged-in user growth improves. Meanwhile, Citi noted that traffic weakness was concentrated among lower-value logged-out users.

Google Search Traffic Raises Growth Concerns For Reddit

Reddit's third-quarter revenue grew 53% year over year to $895 million, beating estimates of approximately $875 million. However, Chief Executive Steve Huffman warned that Google search referrals had declined by more than 1 million per week on average during October.

Reddit’s U.S. daily active users declined 2% year over year to 50.7 million, while global users reached 130.3 million, missing expectations. Reddit management warned that if October's decline in search referrals persists, total daily active users could fall by a low-double-digit percentage in the fourth quarter from a base of approximately 130 million.

Reddit plans to test a primarily logged-in experience in select international markets during the fourth quarter to improve engagement, advertising targeting and control over its content.

Management said logged-in and app users account for more than 80% of monetization. However, KeyBanc warned that the transition could increase marketing costs and slow new-user acquisition, while Oppenheimer flagged uncertainty around its impact on engagement.

What Retail Thinks About RDDT Stock

On Stocktwits, retail investors’ sentiment around RDDT stock flipped to ‘bullish’ amid extremely high message volume.

So far this year, RDDT stock has fallen over 46%. By comparison, the State Street Communication Services Select Sector SPDR ETF (XLC), which holds the stock, has fallen over 13% over the same period.

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