.July 16, 2024 06:39:00 PM

Reddit (NYSE:RDDT) shares dropped over 3% as Loop Capital downgraded the stock from Buy to Hold, citing valuation concerns. The firm maintained a price target of $75. Analysts noted Reddit’s stock is trading at 10 times its 2025 estimated revenue, nearing the target.

Since its IPO in March, Reddit’s stock has more than doubled, resulting in a premium revenue multiple compared to peers. Loop Capital highlighted potential drivers for earnings growth but expressed caution due to the high valuation.

Loop Capital mentioned Reddit’s expansion of advertising to conversation pages, the platform’s fastest-growing ad space. This move aims to capitalize on the contextually relevant area where 40% of comments and conversations are about products or services.