Wey How
Thematic Position Trader, Technology Stocks & Trend Following
Reddit's 20.99% drop reflects the structural weakness in its moat that the latest earnings confirmed. Management said search referrals were choppy and traffic more volatile late in the quarter, and that referral visibility remains low as it builds a daily destination rather than drive-by traffic. The market hates uncertainty; this could still work later, and the stance would change if the price action earns it. x.com
Reddit's worsening US user growth threatens its revenue runway despite elite ARPU growth, revenue growth and margin expansion. US daily users fell 2% year over year and missed estimates by 7%; the Q4 guide was weak. It needs healthier user growth in its most important market to dispel Google/AI discovery fears. Forward indicators do not look promising, and the trend of positive estimate revisions will end. x.com x.com
Reddit's Q3 drop in US daily users risks another poor market reaction, even if headline earnings are strong. Last quarter a slight sequential decline in US daily users sent the shares down 20% despite a massive triple beat; the new chart shows a further sequential drop in Q3. x.com x.com
Reddit's logged-in users drive monetization, so weak search-driven traffic matters less than ARPU. Reddit says app and logged-in users grew sequentially in Q3 and generate over 80% of monetization, though lost search referrals also hurt them. ARPU rose 53% despite barely higher users; a low ad base could allow it to double even with muted growth. Restricting Google scraping might force a licensing deal that helps its Anthropic case and OpenAI renewal, though no deal is certain. x.com x.com x.com … Show more
Reddit's main business is declining and its data licensing business is too limited to make up for it. x.com
Reddit is not a sustainable business because its volunteer moderators are, in large part, far-left extremists. The point came up after Polymarket reported that a man accused of plotting an ISIS-inspired mass shooting moderated the r/doordash subreddit. x.com
Reddit's push toward required logins could improve targeting and monetization but may hinder search discovery and add friction for casual users. Revenue rose 53% to $895M and free cash flow reached $363M, yet overall user growth lagged despite a good showing from US logged-in users; stock-based pay was higher than desired. Google will probably pressure near-term DAU growth. The finances remain solid, but the login strategy's impact on growth needs more clarity. x.com x.com x.com x.com
Reddit carries Pinterest-like downside to a 10x P/E if investors decide North American user growth is toast, while the stock is priced on everyone playing for big numbers from new lab deals. x.com
Reddit's stock is unlikely to rerate until it shows cleaner US daily user growth and less reliance on volatile search referrals, despite a strong financial engine. US DAUq grew only 6% versus 28% internationally, logged-in growth was just 7%, and management called search traffic volatile. The 100M US DAU goal looks further away, AI licensing showed no progress with other revenue up 24% to $43M, and the $860-870M Q3 revenue guide did not address user concerns. x.com
Reddit's data is extremely valuable and should give it more pricing power over time as it licenses that information to AI companies that need data to train their models. It is a well-liked stock and company, and one to keep on the watchlist. x.com
Reddit may face short-term pressure after Morgan Stanley cut its price target from $240 to $210 while keeping Overweight, adding risk premium for possibly slowing user growth and shifting Google traffic, especially AI Overviews reducing referrals. Morgan Stanley stays positive on revenue and EPS growth, and advertising, AI data licensing and Reddit Max remain long-term catalysts. Renewed strength in Google traffic and DAU/WAU growth could bring the target back up. x.com
