Reddit rallies after three-day slump as analyst calls selloff 'excessive'

Core Viewpoint - Reddit's stock has shown volatility, with a recent uptick of over 10% following a significant drop, indicating potential recovery amidst broader market concerns [1][2]. Group 1: Stock Performance - Reddit shares rose more than 10% on Tuesday, reversing a three-day slump, but remain approximately 30% below their previous close [1]. - The company's shares dropped over 15% in February due to weaker-than-expected fourth-quarter user numbers, which were impacted by a Google search algorithm change [2]. - Reddit's shares have been affected by broader market trends, with major tech companies losing over $750 billion in market value recently [3]. Group 2: Analyst Insights - A Loop Capital analyst note characterized Reddit's shares as "extremely attractive" and suggested that the recent 50% drop was excessive, highlighting the company's significant upside potential [2]. - Loop Capital managing director Alan Gould noted that despite a "risk-off market environment," Reddit has been one of the top-performing stocks over the past year, aside from its recent dip [4]. Group 3: Financial Performance - Reddit's fourth-quarter sales grew 71% year-over-year to$ 428 million, marking the fastest growth rate for any quarter since 2022 [5]. - The stock price increased almost sevenfold from a $34 IPO price to a peak of$ 230 in less than a year, driven by growing revenue and improved advertising tools [5]. - Gould emphasized that Reddit deserves a revaluation based on its recent earnings growth and future potential, particularly in narrowing the ARPU gap and data licensing opportunities [6].