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Investing.com - Reddit (NYSE:RDDT) shares declined Wednesday to $208.98, down from $241.98 in the previous session, as RBC Capital maintained its Sector Perform rating and $245.00 price target amid concerns about declining user activity. According to InvestingPro data, the stock remains near its 52-week high of $282.95, despite showing signs of being overvalued.
RBC analyst Brad Erickson highlighted SimilarWeb data showing declining daily active users (DAUs) on a trailing 30-day average, which is circulating on social media and pressuring the stock price.
The firm also noted that Reddit’s citation share on ChatGPT has dropped significantly, falling from approximately 29.2% to 5.3% since September 10th, according to a third-party study.
RBC attributed the citation decline to Google changing its indexing parameters from 100 to 10 per page, causing large language models to access only one-tenth of their prior results when indexing Google’s search data.
While RBC remains "constructive fundamentally" on Reddit’s advertising momentum, the firm expressed concerns about visibility on conversation forum citation share, noting that changes in this area can quickly affect engagement in the "fast-evolving generative search landscape." For deeper insights into Reddit’s valuation and growth prospects, including 18 additional ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, Reddit has seen a series of analyst upgrades, reflecting positive sentiment about its future prospects. RBC Capital increased its price target for Reddit to $245, citing strong growth in ad load compared to other social media platforms like Meta and TikTok. Cannonball Research also raised its price target to $303, maintaining a Buy rating, and highlighted potential growth in advertising revenue driven by Dynamic Product Ads. Piper Sandler upped its target to $290, attributing the change to positive advertising metrics and upbeat company dialogues regarding product developments. JMP Securities followed suit, raising its price target to $300, based on a higher valuation of Reddit’s future earnings potential, citing a faster growth rate than its peers.
In addition to these upgrades, Reddit is reportedly in early talks with Google to explore a new content-sharing agreement. This potential partnership aims to enhance integration with Google’s AI products, leveraging Reddit’s data for search results and AI training. These developments underscore Reddit’s strategic moves to capitalize on advertising and technological advancements.
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