Reddit stock plunged by 60% in March, hit by earnings and a Google algorithm shift that slowed traffic. | Credit: Michael M. Santiago/Getty Images
Key Takeaways
Just months ago, Reddit was a stock market darling, riding high on AI hype and a surge of Google-driven traffic. Now, it’s in freefall.
Reddit Shares have plunged in March , battered by disappointing earnings and a shift in Google’s search algorithm that has eroded U.S. traffic.
As short interest rises and analysts slash price targets, investors question whether Reddit’s growth was sustainable or just a fleeting algorithmic advantage.
Reddit shares tumbled 60% in March and are struggling to recover as tech stocks remain under pressure. The decline follows disappointing earnings and a Google algorithm change that hurt U.S. traffic.
Short interest in Reddit has risen, and analysts have lowered price targets.
“It’s been super overvalued,” said Bob Lang of Explosive Options.
“Their growth rate is strong, but they still aren’t making any money,” he added.
However, a Reddit spokesperson told CCN this isn’t actually true, as, since going public, Reddit has achieved GAAP profitability for two consecutive quarters (third and fourth in 2024 and, previously, it was GAAP profitable in the last quarter of 2023 and the fourth quarter of 2021.
Despite early AI-related enthusiasm, concerns about long-term growth and lockup period expirations fuel selling pressure. The stock has remained up 200% since its IPO, but the outlook remains uncertain.
The stock is now worth $110 per share, down from its February peak of over $208 but still notably higher than the debut price of $47.
Google’s search algorithm has largely fueled Reddit’s rapid user growth, but analysts have warned this boost is unsustainable.
A surge in logged-out users—who visit via search but rarely engage—has inflated traffic numbers without adding long-term value.
Redburn Atlantic analysts argue that Google’s “gift” is reaching a ceiling, and there is a risk that “what Google giveth, it will take away.”
They predict Reddit’s user growth will stall in 2025, making the platform increasingly dependent on advertisers.
Concerns that Reddit’s reliance on Google makes its growth fragile are rising.
“The reality is that Reddit’s potential and value are being overstated,” Redburn analysts told Bloomberg.
However, Reddit stock’s falling trend may not be over. Redburn Atlantic warned that Reddit’s user growth is set to slow, initiating coverage with a ‘sell’ rating and a $75 price target.
The Analysts argued that Reddit remains a niche platform. Its recent growth has been primarily driven by Google’s algorithm favoring its content, an advantage now hitting a ceiling.
“There is clear evidence that the boost to traffic and visibility is peaking, with a risk that what Google giveth, it will taketh away,” they cautioned.
Citizens JMP lowered Reddit’s stock price target from $200 to $155 while maintaining a ‘market outperform’ rating.
With the stock at $110.23, InvestingPro sees it as undervalued relative to its fair value.
The revision reflects lower estimates. Analysts project a 2026 EBITDA of $761 million (35% margin), valuing Reddit at 40 times the expected EBITDA. The company boasts 90.5% gross profit margins and 61.7% revenue growth over the past year.
The previous $200 target was based on an 18 times multiple of 2026 revenue.
Reddit told CCN that these ratings do not reflect the broader consensus. In fact, over 90% of Reddit analysts have issued ‘buy’ or ‘hold’ ratings, with only two assigning a ‘sell.’
Moreover, in the past few weeks, six analysts have reaffirmed their ‘buy’ ratings.
