Evercore ISI downgrades Reddit on traffic weakness, cuts price target to $120

Evercore ISI downgraded Reddit from Outperform to In Line and cut its price target from $265 to $120, citing concerns that monetization gains may not offset declining user traffic. The downgrade follows Reddit's third-quarter results, which beat estimates but included warnings about falling traffic. Analyst Mark Mahaney expressed growing concerns about user sustainability, noting US daily active users fell 2% year-over-year. Management warned global daily active users could decline by a low double-digit percentage in Q4 from roughly 130 million if search referral losses continue at October's pace. The company cited Google's AI-driven search changes and lower rankings for machine-translated content as structural headwinds. Reddit shares fell over 29% Friday after reporting Q3 adjusted earnings of $1.40 per share, beating the $1.33 consensus, with revenue up 53% to $895 million. The company forecast Q4 revenue of $1.00-1.03 billion, below Wall Street's $1.05 billion estimate. Evercore withdrew its tactical outperformance call, citing structural search pressure and unproven app acquisition economics.