Reddit Inc. RDDT is currently experiencing its most significant drop since going public.
Hedgeye Risk Management recently issued a pessimistic report, forecasting a substantial decline in Reddit shares, predicting a drastic 50% fall from current levels.
A Redditor EchoInTheHoller, in a post on the r/stocks subreddit, highlighted the startling fact.
The stock plummeted by as much as 15% on Wednesday, March 27, reaching its lowest point since March 22.
This sudden downturn starkly contrasts Reddit’s exuberant debut on March 21 when it surged by 48%.
Dive Deeper: The Unfolding Reddit Stock Drama
Hedgeye analyst Andrew Freedman remarked, “The stock is fundamentally short, significantly overvalued, and should trade closer to its IPO price of $34, reflecting approximately 50% downside from Tuesday’s close.”
In light of Hedgeye’s short position, Reddit’s valuation is now under scrutiny, sparking discussions on the sustainability of its rapid ascent.
With Reddit’s first-quarter 2024 results expected in late May, anticipation abounds. While early signs hint at positive momentum, concerns linger over potential future vulnerabilities.
Responses from Reddit users vary, with some questioning Hedgeye’s historical accuracy, pointing out the scarcity of data regarding their forecasts.
Others acknowledge the risks involved in shorting a stock like Reddit, highlighting its limited float and the potential for a short squeeze.
As investors navigate this volatile phase, attention turns to Reddit’s performance in the forthcoming quarters. Whether the company can defy Hedgeye’s grim outlook and recapture its upward trajectory remains uncertain.
Benzinga contacted Reddit for a statement but has yet to receive a response.
Related: Tesla Investor Ross Gerber Raises Doubts About Reddit’s Business Model: ‘Is It Truly a Tech Non-Profit?’
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