Following its IPO, Reddit Inc ( RDDT ) has faced skepticism from U.S. brokerages regarding its profitability and the risk of becoming a ‘meme stock.’ 

Since its inception in 2005, Reddit ( RDDT ) has yet to report an annual profit, and its stock price has dropped below the initial offering price of $47, last trading down at $45.88. 

Bernstein and Baird were among the first to issue ratings. Bernstein assigned an ‘Underperform’ rating and a $40 price target, citing concerns over Reddit’s engagement metrics and content nature, Reuters reports. 

Meanwhile, Baird gave a ‘Neutral’ rating with a $50 target, noting Reddit’s robust user community and potential for margin growth. 

The platform’s fame surged in 2021 during the ‘meme-stock’ phenomenon, spearheaded by its “Wallstreetbets” forum, which led to massive buys in stocks like GameStop. 

In March, Reddit ( RDDT ) marked its highly anticipated debut on the public markets, highlighting the first significant IPO of 2024. The company set its initial public offering price at $34 per share.

In an unusual move, Reddit ( RDDT ) reserved 8% of its IPO shares for its users, moderators, board members, and employees’ relatives. 

Despite predicted first-quarter operating profits significantly increasing, Bernstein analysts remain cautious. They label Reddit ( RDDT ) an “institutional meme stock” and doubt the platform’s advertising and profit growth promises.

The stock has lost over 9.2% since its IPO. 

Price Action: RDDT shares traded higher by 0.48% at $45.56 premarket on the last check Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.