Reddit (RDDT) Has Strong Financials. Are User Trends the Bigger Risk?

On September 17, DA Davidson lowered its price target on Reddit, Inc. (NYSE:RDDT) from $200 to $185 and maintained its Buy rating.

The firm pointed to near-term risks to the company’s daily active user growth and cited Similarweb data showing continued pressure on global daily active users. According to DA Davidson, the latest web traffic trends indicate that global daily active users could come in below consensus estimates.

The firm expects September traffic trends to remain challenging, based on Reddit, Inc.’s historical patterns during the month.

However, DA Davidson believes stronger app engagement could support average revenue per user expansion, allowing the company to maintain strong revenue growth. The firm also noted that Reddit, Inc. could emerge with more engaged users who spend longer periods on the platform on average, despite ongoing concerns around users and licensing deals.

Financial Results Tell a Different Story

Interestingly, the company’s latest financial results provide support for the bullish argument. In Q2 2026, daily active uniques rose 18% year over year to 130.3 million. This helped revenue reach $805 million, marking the company’s eighth consecutive quarter with more than 60% year-over-year revenue growth.

Profitability also improved sharply. Reddit, Inc. reported $253 million in net income for the quarter, an increase of $164 million from the same period a year earlier.

These results show that the company is maintaining a rapid pace of revenue growth while also significantly improving profitability. The growth in daily active users further suggests that the platform continues to grow its user base, even when recent traffic data raises some concerns about the near-term trend.

What the Numbers Say

Despite the strong financial performance, Reddit, Inc. has struggled this year. Shares are down more than 30% year-to-date, making it one of the weaker-performing stocks in the S&P 500.

Meanwhile, hedge fund interest in the stock increased during the second quarter. According to Insider Monkey‘s database, 91 hedge funds held Reddit, Inc. at the end of the second quarter, up from 70 in the first quarter.

Short interest also remains relatively high. As of August 31, short interest stood at 13.96% of Reddit, Inc.’s float.

Analyst sentiment, however, remains largely positive. Of the 35 analysts covering Reddit, Inc., 66% rate the stock a Buy. The median 12-month price target of $212.50 also implies nearly 34% upside from the stock’s current price as of September 21.

The disconnect between the stock performance and the company’s financial results is notable. While the shares have fallen more than 30% this year, Reddit, Inc. has continued to deliver more than 60% revenue growth for eight straight quarters. The company’s net income also more than doubled. For now, the financials remain strong, but the key risk is whether weaker user traffic trends eventually translate into slower growth.

READ NEXT: Netflix (NFLX) Gets a Bullish $110 Target: What’s Driving the Outlook? and Eli Lilly (LLY) Gets a Big Price Target Boost, Analysts See 20% Upside.

Follow Insider Monkey on Google News.