From Financial Modeling Prep: 2025-05-19 16:24:00

Wells Fargo downgraded Reddit (NYSE:RDDT) from Overweight to Equal Weight, citing structural user engagement challenges and a less favorable advertising outlook. The company’s shares dropped over 4% intra-day to $115 from $168. Concerns include disruptions in user activity, potential decline in logged-out traffic, and lower ad revenue from logged-out users.

The bank highlighted worries about Reddit’s ability to meet long-term advertising expectations compared to market giants like Meta. Wells Fargo also cut its three-year logged-in DAU growth forecast to 10% CAGR from 13%. The firm expects Reddit’s ad revenue and EBITDA in 2026 and 2027 to fall below consensus by 6% and 14%, respectively.

Reddit’s decision to prioritize community health over monetization may limit the potential for high-margin data licensing revenue. Wells Fargo’s downgrade reflects these concerns, as well as the impact of Google’s AI integration in search on Reddit’s user base and advertising revenue.



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