03:06 PM EDT, 03/27/2024 (MT Newswires) -- (Updates stock movement in first paragraph and adds Hedgeye comments in fourth, fifth and sixth paragraphs)

Reddit ( RDDT ) shares were down more than 8% in recent Wednesday trading after research investment firm Hedgeye Risk Management put out a report calling the social media platform a short idea.

Hedgeye said that Reddit ( RDDT ) stock has a 50% downside risk from the stock's initial public offering price.

Reddit ( RDDT ) shares debuted on the New York Stock Exchange March 21 at $47, higher than the initial public offering price of $34. The shares had steadily gained following the IPO, hitting a high of $74.90 before closing at $65.11 on Tuesday. But they now look on track for their sharpest decline since that debut.

"Where we sit today, the hype around Reddit's ( RDDT ) IPO is starting to wear off and the stock at $65+ is grossly overvalued," Hedgeye said in its report sent to institutional clients.

To justify the price of $75 per share, Hedgeye said Reddit ( RDDT ) would need to sustain more than 35% revenue growth in H1 of 2024 and above 30% in H2. Hedgeye estimates revenue growth of 25% to 27% in H1 and 20% to 23% in H2.

"Reddit's ( RDDT ) platform has fundamental limitations that cap the growth of users, advertising, and data licensing," it said, citing

Reddit's ( RDDT ) content that is predominantly in English, weak advertising technology, among other constraints.

Reddit ( RDDT ) declined to comment.

Price: 59.78, Change: -5.33, Percent Change: -8.19