Reddit shares slump 6% on daily active user miss

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shares slump 6% on daily active user miss

Steve Huffman, co-founder and CEO of

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, speaks during WSJ Tech Live conference hosted by the Wall Street Journal at the Montage Laguna Beach in Laguna Beach, California, on October 21, 2024. 

Frederic J. Brown | Afp | Getty Images

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shares dropped more than 6% Thursday after the social media company fell short of Wall Street’s user estimates in the fourth quarter.

The company reported a 39% rise in global daily active uniques from a year ago to 101.7 million, below the Wall Street estimate of 103.1 million.

In a letter to shareholders, CEO Steve Huffman said that

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experienced some “volatility” in user growth as a result of a

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search algorithm change. He noted that the tweak occurs twice a year and primarily impacts logged-out users who visit the site without an account, but search-related traffic has since recovered into the first quarter.

“What happened wasn’t unusual — referrals from search fluctuate from time to time, and they primarily affect logged-out users,” Huffman wrote. “Our teams have navigated numerous algorithm updates and did an excellent job adapting to these latest changes effectively.”

Despite the disappointing user figure,

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surpassed Wall Street’s top-and-bottom line estimates for the *******, with earnings of 36 cents per share on $428 billion in sales. Analysts polled by LSEG had forecast earnings of 25 cents per share and $405 billion in revenue. Sales also grew 71% from a year ago.

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also offered better-than-expected revenue guidance for the first quarter, while net income roughly quadrupled to $71 million, or 36 cents per share.

Many Wall Street analysts stood by the stock despite the

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issue, with Morgan Stanley analyst Brian Nowak recommending that investors buy the dip. Wells Fargo analyst Ken Gawrelski maintained his overweight rating, but said a full bounce back in the stock may depend on steady consecutive U.S. user growth.

“We like

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’s growth but see balanced risk reward,” wrote Bank of America’s Justin Post. He cited a high valuation, dependence on

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and a potential revenue deceleration later this year among the reasons for his neutral rating.

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’s stock has climbed since its initial public offering in March 2024 at $34 a share. Shares are up 24% year to date.

— CNBC’s Jonathan Vanian contributed reporting

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#

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#shares #slump #daily #active #user

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