Reddit Stock Declines 46% in a Month: Should You Buy, Hold or Sell?

Reddit RDDT shares have declined 46.2% in the past month, underperforming the broader Zacks Computer & Technology sector’s 2.1% plunge. The Zacks Internet - Software industry has decreased 5.3% in the same time frame.

The company’s shares have also underperformed those of its peers, including Snap SNAP, Meta Platforms META and Pinterest PINS, which are expanding into advertising to compete in the rapidly growing digital ad market. While Snap and Pinterest shares have declined 37.5% and 30.8%, Meta Platforms shares have risen 6%.

The underperformance can be attributed to a challenging macroeconomic environment, including elevated tariffs, which may reduce discretionary ad spending. Stiff competition also remains a concern.

RDDT Stock Performance

The company’s strong user engagement, including rising daily and weekly active users, gains in Average Revenue Per User (“ARPU”), and the expansion of advertiser tools such as Dynamic Product Ads (“DPA”), Reddit Pixel and CAPI have been noteworthy. In the fourth quarter of 2025, ARPU increased 42% year over year to $5.98, indicating that portfolio expansions are driving higher monetization per user. 

The company is also benefiting from its investment in AI-powered tools, which are driving the company’s user engagement and ad revenues. In the fourth quarter of 2025, Reddit reported 121 million daily active users (DAUs), reflecting a 19% year-over-year increase, and 471 million weekly active users (WAUs), marking 24% year-over-year growth.

Reddit Benefits From Expanding Ad Demand

Reddit is gaining from its strong focus on enhancing user-friendly features, which is driving significant growth in user engagement and ad revenues. In the fourth quarter of 2025, Advertising revenues surged 75% year over year to $690 million.

Further expanding its portfolio, Reddit recently announced the beta launch of Max campaigns. This AI-powered automated ad solution optimizes targeting, creative, placements, and budget in real time to improve performance and reduce manual effort. 

Using Reddit Community Intelligence, Max campaigns offer unique audience insights, including Top Audience Personas, which help advertisers understand who engages with their campaigns and what content resonates. Early testers experienced up to 27% more conversions and lower costs, showing both efficiency and effectiveness.

Earnings Estimates for Reddit Show Upward Trend

RDDT’s expanding portfolio and rising user engagements are expected to drive the company’s top-line growth.

For the first quarter of 2026, RDDT expects revenues between $595 million and $605 million. The Zacks Consensus Estimate for first-quarter revenues is pegged at $614.09 million, indicating year-over-year growth of 56.51%. 

For the first quarter, the consensus mark for earnings is pegged at 60 cents per share, which increased 7.14% in the past 30 days. This implies year-over-year growth of 361.54%.

Reddit Inc. Price and Consensus

Reddit Inc. price-consensus-chart | Reddit Inc. Quote

RDDT Faces Stiff Competition

Despite an expanding portfolio and rising user engagements, RDDT is facing stiff competition from competitors like Snap, Meta Platforms and Pinterest.

Snap is benefiting from strong revenue growth driven by improved advertising demand and the expansion of direct revenue streams. In the fourth quarter, total active advertisers jumped 28% year over year, driven in part by simplified onboarding, improved campaign workflows and increased performance.

Meta Platforms’ focus on integrating AI into its platforms, which include Facebook, WhatsApp, Instagram, Messenger and Threads, is driving user engagement to boost ad revenues. In the fourth quarter of 2025, Advertising revenues increased 24.3% year over year to $58.14 billion and accounted for 97.1% of fourth-quarter revenues. At cc, revenues rose 23% year over year.

Pinterest is expanding its portfolio through acquisition. In December 2025, Pinterest announced that it had inked a definitive agreement to acquire tvScientific, a firm specializing in a connected TV advertising platform. The buyout will enable Pinterest to bring its advertising business to TV screens, allowing advertisers to compare the impact of TV ads on their marketing campaigns.

RDDT Stock Overvalued

Reddit stock is currently trading at a premium, as suggested by the Value Score of D.

In terms of the forward 12-month Price/Sales ratio, RDDT is trading at 8.33, higher than the broader Zacks Computer & Technology sector’s 6.54.

RDDT Valuation

Conclusion

Reddit’s prospects benefit from an expanding advertising business, an expanding clientele, and an improved user experience with upgraded search and discovery features.

A challenging macroeconomic environment, including elevated tariffs, may reduce discretionary ad spending. Stretched valuation and stiff competition also remain a concern.

Reddit currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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