Why Reddit Inc. (RDDT) Crashed On Tuesday?

We recently published a list of 10 Firms Heavily Hit by Market Pessimism. In this article, we are going to take a look at where Reddit Inc. (NYSE:RDDT) stands against other firms heavily hit by market pessimism.

Wall Street finished in the red territory on Tuesday, as investors repositioned their portfolios ahead of the Fed rate decision on Wednesday.

The Nasdaq dropped the highest among its peers, declining 1.71 percent. The S&P 500 followed with a 1.07-percent loss, while the Dow Jones decreased by 0.62 percent.

The market pessimism spilled over to various sectors, with 10 companies notably hit the most.

In this article, we have identified the 10 worst performers on Tuesday and detailed the reasons behind their drop.

To come up with the list, we only considered the stocks with a $2-billion market capitalization and $5 million in trading volume.

Photo by Annie Spratt on Unsplash

Reddit Inc. (NYSE:RDDT)

Reddit shares fell by 12.31 percent on Tuesday to close at $110.10 each following a “sell” recommendation from an investment firm.

While RDDT saw impressive user growth, analysts from Redburn raised doubts on its sustainability, calling it a “gift” from Alphabet’s Google.

Google made changes to its algorithm that led RDDT to nearly double its size in the past 18 months. However, Redburn believed that most of its users looking for answers to specific questions do not convert to log-in users, who are ultimately much more valuable.

“There is clear evidence that the boost to traffic and visibility from these changes is hitting a ceiling,” the analysts said, adding that “what Google giveth, it will taketh away.”

Overall, RDDT ranks 3rd on our list of firms heavily hit by market pessimism. While we acknowledge the potential of RDDT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is as promising as RDDT but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.