Reddit Inc. experienced its most significant one-day drop since its IPO, plunging 11% to close at $57.75

he social media platform’s shares had previously soared, reaching a peak close of $65.11 post-IPO, driven by investor excitement around artificial intelligence.

However, Hedgeye deems the stock “grossly overvalued,” suggesting it should align closer to its $34 IPO price.

Hedgeye had eyed Reddit as a short target from the IPO’s inception, citing concerns over its high volatility in early trading. Despite initial positive indicators, including an oversubscribed deal and favorable timing coinciding with expected short-term revenue and user growth, Hedgeye anticipates a downturn.

The firm’s analysis points to potential weaknesses in Reddit’s performance in the latter half of 2024 and the first half of 2025, expecting a sharp decline in user and revenue growth rates.

This downturn comes amidst Reddit’s status as one of 2024’s largest IPOs on a US exchange, reflecting broader market enthusiasm for AI-driven companies.

While Reddit’s upcoming first-quarter results may show initial growth, Hedgeye’s projections raise concerns about the platform’s ability to maintain momentum, focusing on the potential for deceleration in key metrics over the next year.