Reddit Beat on Revenue, Profit, and Guidance. Its U.S. Daily Users Went Backward, and the Stock Fell 21%.
Reddit reported strong financial growth in the second quarter, but its stock fell 21% following a slight decline in U.S. daily active users. While international growth remains robust, investors reacted negatively to the stagnation in the company's primary market.
Why it matters
The market reaction underscores the high sensitivity of tech stock valuations to user growth metrics in core markets.
Reddit ( RDDT -20.99% ) delivered the kind of second quarter growth investors usually celebrate. Revenue rose 61% year over year to $805 million, the company's eighth consecutive quarter of growth above 60%.
Net income of $253 million nearly tripled from $89 million a year ago, reaching 31% of revenue. And management guided for third-quarter revenue of $860 million to $870 million, more growth than most companies can dream of.
The stock fell 21% Friday anyway, closing at about $141.
The trouble was in the user table. Reddit's U.S. daily active uniques (the company's count of unique daily visitors) slipped to 53.2 million in the second quarter from 53.5 million in the first quarter. Nearly everything else in the report grew. That number went backward. To me, it explains the whole reaction.
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