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Reddit Stock Falls 28.2% in 6 Months: Should You Buy the Dip?
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Key Takeaways
Reddit's DAUq grew 17%, WAUq 23% and ARPU 44% year over year in the first quarter of 2026.
RDDT is expanding globally with machine translation, lifting international revenues and user growth.
RDDT trades at a premium, but revenue and earnings estimates point to strong year-over-year growth.
Reddit (RDDT - Free Report) shares have lost 28.2% in the past six months, in contrast to the broader Zacks Computer & Technology sector’s rise of 15.2%.
The company’s shares have also underperformed its peers like Pinterest (PINS - Free Report) , META Platforms (META - Free Report) , and Alphabet (GOOGL - Free Report) , which are expanding their footprint into advertising to compete in the rapidly growing digital ad market. While Pinterest and Meta Platforms’ shares have lost 20.8% and 13.4%, respectively, Alphabet shares have risen 13.4% in the past six-month period.
Reddit’s underperformance can be attributed to a challenging macroeconomic environment and seasonal volatility. Stiff competition in the digital advertising market poses a significant challenge for Reddit.
RDDT Stock Performance
Image Source: Zacks Investment Research
However, the company’s expanding portfolio, strong user engagement, including rising daily and weekly active users, gains in Average Revenue Per User (ARPU), and the expansion of advertiser tools such as Dynamic Product Ads (DPAs), Reddit Pixel, and CAPI have been key catalysts. These factors are expected to fend off competitors like Pinterest, Meta Platforms, and Alphabet.
RDDT Benefits From Expanding Portfolio
Reddit’s expanding portfolio has been a key catalyst in driving the company’s user engagement. In the first quarter of 2026, ARPU increased 44% year over year to $5.23, indicating that portfolio expansions are driving higher monetization per user. Reddit reported 126.8 million daily active uniques (DAUq), up 17% year over year, and 493.1 million weekly active uniques (WAUq), up 23% year over year.
Further expanding its portfolio, in June 2026, Reddit launched video in comments, allowing users to reply with short videos alongside text, images and GIFs for more expressive conversations. Users can upload an existing clip or record one directly within the comment box.
The feature is being rolled out across eligible public, safe-for-work communities, while moderators retain control over whether video comments are enabled and who can post them. The new addition makes discussions more immersive by letting users demonstrate ideas visually, further expanding engagement options and encouraging richer community interactions.
RDDT Rides on Strong International Expansion
Reddit is benefiting from a robust international expansion strategy that is fueling both its financial performance and long-term growth prospects. In the first quarter of 2026, international revenues surged 76% year over year, outpacing the already strong 67% growth in U.S. revenues.
In the first quarter of 2026, International ARPU increased 51% year over year to $2.02, signaling improving monetization intensity across regions. The platform’s international daily active unique users grew 26% year over year to 73.3 million. These metrics highlight Reddit’s ability to attract and engage users outside the United States, which is critical for its advertising revenues.
One of the key drivers behind this international momentum is Reddit’s investment in machine translation, which has enabled the platform to support content in more than 30 languages, helping to build local communities and increase engagement outside the United States. The company is also investing in features like bot verification, improved onboarding, and faster app performance to enhance user experience. The adoption of advanced ad products like Reddit Max and Dynamic Product Ads is helping advertisers achieve strong returns, further encouraging global brands to invest in Reddit’s platform.
Earnings Estimates for Reddit Show Upward Trend
RDDT’s expanding portfolio and rising user engagement are expected to drive the company’s top-line growth.
For the second quarter of 2026, management expects revenues to be in the range of $715 million to $725 million. The Zacks Consensus Estimate for second-quarter revenues is pegged at $746.89 million, indicating year-over-year growth of 49.49%.
For the second quarter, the consensus mark for earnings is pegged at 99 cents per share, unchanged over the past 30 days. This implies year-over-year growth of 120%.
Reddit stock is currently trading at a premium, as suggested by its Value Score of F.
In terms of the forward 12-month price/sales ratio, RDDT is trading at 8.84X, higher than the broader Zacks Computer & Technology sector’s 6.49X.
RDDT Valuation
Image Source: Zacks Investment Research
Conclusion
Reddit’s prospects benefit from an expanding advertising business, an expanding clientele, and rising user engagement. These factors justify the company’s premium valuation.
RDDT stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
Reddit Stock Falls 28.2% in 6 Months: Should You Buy the Dip?
Key Takeaways
Reddit (RDDT - Free Report) shares have lost 28.2% in the past six months, in contrast to the broader Zacks Computer & Technology sector’s rise of 15.2%.
The company’s shares have also underperformed its peers like Pinterest (PINS - Free Report) , META Platforms (META - Free Report) , and Alphabet (GOOGL - Free Report) , which are expanding their footprint into advertising to compete in the rapidly growing digital ad market. While Pinterest and Meta Platforms’ shares have lost 20.8% and 13.4%, respectively, Alphabet shares have risen 13.4% in the past six-month period.
Reddit’s underperformance can be attributed to a challenging macroeconomic environment and seasonal volatility. Stiff competition in the digital advertising market poses a significant challenge for Reddit.
RDDT Stock Performance
Image Source: Zacks Investment Research
However, the company’s expanding portfolio, strong user engagement, including rising daily and weekly active users, gains in Average Revenue Per User (ARPU), and the expansion of advertiser tools such as Dynamic Product Ads (DPAs), Reddit Pixel, and CAPI have been key catalysts. These factors are expected to fend off competitors like Pinterest, Meta Platforms, and Alphabet.
RDDT Benefits From Expanding Portfolio
Reddit’s expanding portfolio has been a key catalyst in driving the company’s user engagement. In the first quarter of 2026, ARPU increased 44% year over year to $5.23, indicating that portfolio expansions are driving higher monetization per user. Reddit reported 126.8 million daily active uniques (DAUq), up 17% year over year, and 493.1 million weekly active uniques (WAUq), up 23% year over year.
Further expanding its portfolio, in June 2026, Reddit launched video in comments, allowing users to reply with short videos alongside text, images and GIFs for more expressive conversations. Users can upload an existing clip or record one directly within the comment box.
The feature is being rolled out across eligible public, safe-for-work communities, while moderators retain control over whether video comments are enabled and who can post them. The new addition makes discussions more immersive by letting users demonstrate ideas visually, further expanding engagement options and encouraging richer community interactions.
RDDT Rides on Strong International Expansion
Reddit is benefiting from a robust international expansion strategy that is fueling both its financial performance and long-term growth prospects. In the first quarter of 2026, international revenues surged 76% year over year, outpacing the already strong 67% growth in U.S. revenues.
In the first quarter of 2026, International ARPU increased 51% year over year to $2.02, signaling improving monetization intensity across regions. The platform’s international daily active unique users grew 26% year over year to 73.3 million. These metrics highlight Reddit’s ability to attract and engage users outside the United States, which is critical for its advertising revenues.
One of the key drivers behind this international momentum is Reddit’s investment in machine translation, which has enabled the platform to support content in more than 30 languages, helping to build local communities and increase engagement outside the United States. The company is also investing in features like bot verification, improved onboarding, and faster app performance to enhance user experience. The adoption of advanced ad products like Reddit Max and Dynamic Product Ads is helping advertisers achieve strong returns, further encouraging global brands to invest in Reddit’s platform.
Earnings Estimates for Reddit Show Upward Trend
RDDT’s expanding portfolio and rising user engagement are expected to drive the company’s top-line growth.
For the second quarter of 2026, management expects revenues to be in the range of $715 million to $725 million. The Zacks Consensus Estimate for second-quarter revenues is pegged at $746.89 million, indicating year-over-year growth of 49.49%.
For the second quarter, the consensus mark for earnings is pegged at 99 cents per share, unchanged over the past 30 days. This implies year-over-year growth of 120%.
Reddit Inc. Price and Consensus
Reddit Inc. price-consensus-chart | Reddit Inc. Quote
RDDT Stock Is Overvalued
Reddit stock is currently trading at a premium, as suggested by its Value Score of F.
In terms of the forward 12-month price/sales ratio, RDDT is trading at 8.84X, higher than the broader Zacks Computer & Technology sector’s 6.49X.
RDDT Valuation
Image Source: Zacks Investment Research
Conclusion
Reddit’s prospects benefit from an expanding advertising business, an expanding clientele, and rising user engagement. These factors justify the company’s premium valuation.
RDDT stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.