What Happened?
Shares of online community and discussion platform Reddit (NYSE: RDDT) jumped 8.6% in the morning session after stocks rebounded (Nasdaq +2.0%, S&P 500 +1.5%) following a report from The Wall Street Journal stating that the Trump administration's reciprocal tariffs, to be announced on April 2, 2025, would be more narrowly targeted.
The market reaction indicated that investors took that as a sign the economic impact of the tariffs, particularly on inflation and growth, might not be as bad as they initially feared. That's a bit of a relief, which likely gave businesses and analysts some space to rethink their outlooks. Earlier, the administration had hinted at much broader tariffs that could have hit any country placing duties on U.S. imports, so this shift was likely a welcome surprise for the market.
The shares closed the day at $124.78, up 8% from previous close.
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What The Market Is Telling Us
Reddit’s shares are extremely volatile and have had 66 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 11.9% on the news that markets seemed to have caught "tariff/trade war fever" once again (Nasdaq down 1.9%, S&P 500 down 1.2%) amid broader geopolitical anxiety. The volatility was perhaps also related to uncertainty surrounding the Fed's rate decision to be announced later in the week. The consensus estimate was for the Fed to keep interest rates at the range of 4.25%-4.5%. This could be a bit of a letdown for the dovish camp, expecting some policy relief to help offset the growing market weakness amid the ongoing trade war, which some analysts considered to be bad for growth and corporate earnings. Separately, Redburn analysts initiated coverage on the stock with a Sell rating and a $75 price target. The target price implied a potential 30% downside from where shares traded before the bearish rating was revealed.
Reddit is down 24.8% since the beginning of the year, and at $124.75 per share, it is trading 44.6% below its 52-week high of $225.23 from February 2025. Investors who bought $1,000 worth of Reddit’s shares at the IPO in March 2024 would now be looking at an investment worth $2,473.
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