NASDAQ:RDDT Tumbles to $75—Can Reddit’s Blockbuster Q4 Results Fuel a Comeback?

The Major Pullback in NASDAQ:RDDT and What It Signals

Reddit’s share price, which peaked near $176 late last year, has tumbled over 57 percent to trade around $75 today (see TradingNews real-time chart for NASDAQ:RDDT). This dramatic drawdown reflects a mix of market-wide volatility and company-specific concerns—most notably a brief sequential decline in U.S. daily active users (DAUs) in Q4 and investor anxiety over an advertising slowdown amid tariff uncertainty. Yet beneath the headline pullback, Reddit continues to exhibit blockbuster growth in revenue and profits, and the business remains fundamentally intact thanks to innovative ad formats, surging data-licensing income, and robust cash generation.

Stellar Q4 FY 2024 Performance Under the Hood

Reddit delivered Q4 sales of $427.7 million, up 71 percent year-over-year, easily topping the management’s $403 million midpoint guidance. Advertising revenue of $394.5 million grew 60 percent, while “Other” revenue—driven by data licensing agreements—jumped over 100 percent to $33.3 million. User engagement surged to 101.7 million DAUs, up 39 percent, propelled by deeper international traction and AI-powered features such as automatic machine translation (available in eight languages) and the launch of Reddit Answers, which turns community knowledge into conversational search results.

Profitability surged in tandem. Adjusted EBITDA reached $154.3 million, a 36.1 percent margin that represents a remarkable 2,680 basis-point expansion versus Q4 2023. On a GAAP basis, Reddit turned profitable for the second quarter in a row, reporting net income of $42 million. Free cash flow of $115 million further bolstered the balance sheet, leaving $1.84 billion in cash against zero debt.

Q1 FY 2025 Guidance and the Wall Street Reaction

For the quarter ending June 30, Reddit projects revenue of $360–$370 million (52 percent y/y growth at the midpoint) and adjusted EBITDA of $85–$90 million (23.3 percent margin). Analysts were modeling $358.7 million in sales, so the top-line outlook was slightly above consensus, yet the stock plunged following the release. Investors appeared unsettled by the sequential drop from Q4’s 36 percent EBITDA margin to the mid-20s forecast for Q1, as well as comments that an algorithm tweak at Google briefly dented Reddit’s logged-out user referrals and U.S. DAUs. Management did confirm that search traffic has largely rebounded in early Q1, but the volatility in user growth—particularly in America, where ARPU is four times higher than international markets—remains the market’s key focal point.

User Monetization and Advertising Innovations

Reddit’s average revenue per user (ARPU) climbed 23 percent y/y in Q4 to $4.21, driven by stronger ad load among U.S. users (up 28 percent to $13.50) and deepening monetization overseas (up 25 percent to $1.60). The company’s suite of “Reddit-unique” ad formats—Conversions ads, Ask Me Anything sponsorships, video view ads—continues to outperform industry click-through benchmarks, thanks to the platform’s highly engaged “community” and intent-driven “seeker” audiences. Data-licensing revenue, while a smaller slice of the pie today, enjoys near-100 percent gross margins and grew 120 percent y/y in Q4, demonstrating Reddit’s potential to diversify beyond ad spend alone.

Valuation Reset Creates a Rare Entry Point

At Thursday’s close of $75, Reddit carries a market capitalization of $18.3 billion. After netting out $1.84 billion in cash, the enterprise value stands near $16.5 billion. Wall Street projects $1.74 billion in revenue for FY 2025 (37 percent y/y growth) and $2.25 billion in FY 2026 (29 percent growth). That places NASDAQ:RDDT at roughly 9.4 times EV/forward revenue—only a modest premium to peer Meta Platforms (EV/2025 sales of 7.6×) despite Reddit’s growth rate being nearly three times faster. If Reddit achieves consensus estimates and sustains 30 percent adjusted EBITDA margins by FY 2026, this reset valuation offers meaningful upside.

Insider Transaction Trends and Governance Signals

According to the insider transactions page on TradingNews, several executives increased their personal holdings in the wake of Q4 results, including the CFO’s purchase of 10,000 shares at $80.50. These insider buys at elevated levels reflect confidence in Reddit’s long-term trajectory. No significant insider sales have been recorded in the past six months, underscoring alignment between management and shareholders.

Key Risks on the Radar

The principal near-term risk remains user growth volatility in the U.S., where advertisers pay the highest rates. Another algorithm tweak at Google or unanticipated changes in social media referral dynamics could pressure DAUs. Macro headwinds—tariff shocks, consumer belt-tightening, ad-spend cutbacks—pose further uncertainty. Finally, the competitive landscape is intense: Meta’s Groups product and TikTok’s Sponsored Posts continue to vie for advertiser budgets.

Verdict—Absolute and Relative Value in the Pullback

Despite the 57 percent drawdown from peak levels, Reddit’s Q4 acceleration in both revenue and profits, combined with a fortress-like balance sheet and insider confidence, argue for the stock’s resilience. With forward EV/sales under 10× against 30–40 percent growth, NASDAQ:RDDT registers as one of the most compelling growth-at-a-reasonable-price opportunities in social media today. Investors with a multi-quarter horizon may consider building or adding to positions ahead of the May 1 earnings release, when a return to U.S. DAU growth and margin stability could reignite the stock’s trajectory.

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