Reddit Faces Retail Backlash As Subreddits Revolt Against Musk’s Controversial Gesture With X Link Ban, Stock Climbs

Reddit, Inc. (RDDT) stock recovered from Thursday's early sell-off and moved into positive territory, but retail sentiment plummeted.

The shares of the San Francisco-based community-focused social media company fell about 2.5% on Wednesday after Roth MKM downgraded its stock to ‘Neutral’ from ‘Buy.’ But the firm raised the price target to $195 from $116, suggesting a little over 6% upside potential.

According to the firm, the downgrade was purely due to valuation concerns. It noted that since the company’s March 2024 initial public offering at $34 per share, the stock has jumped 450%. Therefore, the firm said the near-term risk/reward is “fairly balanced” at current levels.

Roth MKM’s comments came close on the heels of Reddit stock hitting an all-time high of $191. 

Reddit also faced negative headlines over several popular Reddit subreddits banning X links on the platform, protesting against X owner Elon Musk’s gesture that was construed by many as a Nazi salute.

The stock rose sharply in late October after the company revealed a surprise profit and reported 68% year-over-year (YoY) revenue growth. 

The next major catalyst could be the fourth-quarter results due after the market closes on Feb. 12. The consensus estimates call for a quarterly profit of $0.24 and revenue of $404.2 million. 

On Stocktwits, sentiment toward Reddit stock plunged to ‘extremely bearish’ (17/100) from ‘neutral’ a day ago, while message volume stayed at ‘high’ levels.

Some retailers said President Donald Trump’s victory is negative for “highly censored” platforms like Reddit.

A few expressed concerns over insider selling, while others said the valuation was high.

By mid-session, Reddit stock rose 1.46% to $186.42.

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