Reddit (RDDT) stock dropped over 10% after ChatGPT citations fell to just 2%, down from 9.7% in August. Despite a 4% rebound, the decline is concerning for a stock trading at over 100 times earnings. Reddit’s business model relies on AI relevance, with ad revenue growing 84% to $465 million in Q2.

Google search drives most of Reddit’s traffic, making algorithm changes a potential threat to user growth. Despite ChatGPT citations falling, Reddit posted strong Q2 results with revenue up 78% to $500 million, daily active users growing by 21%, and turning profitable with $89 million in net income.

Reddit’s CEO noted the platform is vital for training AI models, generating $35 million in data licensing revenue. The company is investing in core product improvements, search expansion, and international growth, with a focus on long-term value. Reddit’s fundamentals suggest resilience despite the recent selloff.

Analysts forecast RDDT stock to increase revenue from $2 billion in 2024 to $5.6 billion in 2029, with free cash flow improving from $648 million to $2.17 billion. Out of 26 analysts covering RDDT stock, 14 recommend “Strong Buy,” with an average price target of $224, above the current price of $208.

Read more at Yahoo Finance: ChatGPT Could Kill the Reddit Star. Does That Mean You Should Sell RDDT Stock Here?