Meta's New App Threatens Reddit's User Base
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Source: Newsfilter
Reddit Inc's stock rose by 5.00% as it crossed above the 20-day SMA, reflecting a positive market trend.
The recent launch of Meta's Forum app, aimed at competing with Reddit, has raised concerns about potential user attrition. Analysts from Truist have noted that while Reddit's advertising revenue has surged, the competition could gradually erode its appeal to casual users. Despite this, Reddit reported a significant revenue increase of 69% year-over-year in Q1 2026, indicating strong growth momentum.
The implications of Meta's new app could lead to shifts in user engagement, but Reddit's core user base may remain loyal, providing a mixed outlook for the company's future performance.
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Analyst Views on RDDT
Wall Street analysts forecast RDDT stock price to rise
22 Analyst Rating
14 Buy
8 Hold
0 Sell
Moderate Buy
Current: 167.690
Low
207.00
Averages
260.00
High
325.00
Current: 167.690
Low
207.00
Averages
260.00
High
325.00
About RDDT
Reddit, Inc. operates a social platform, Reddit. Reddit is a community of communities. It is built on shared interests, passion, and trust and is home to open and authentic conversations on the Internet. Reddit is a global, digital city where anyone in the world can join a community to learn from one another, engage in authentic conversations, explore passions, research new hobbies, exchange goods and services, create new communities and experiences, share a few laughs, and find belonging. Reddit has thousands of communities, endless conversations, and authentic human connections. Communities on Reddit are organized based on specific interests and are called subreddits. Reddit offers real-time access to evolving and dynamic topics, such as sports, movies, news, fashion, and the latest trends. On Reddit, users can submit, vote, and comment on the topics they care about. It has approximately 100,000+ active communities and approximately 101+ million daily active visitors.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Stock Price Reaction: Reddit shares fell approximately 6% on Friday, reflecting market concerns about potential user attrition due to Meta's new app, despite Reddit's strengthening online ad business and a nearly 40% decline in stock price this year.
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See More
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- Stock Decline: Reddit shares fell approximately 6% on Friday, reflecting market concerns over Meta's new Forum app potentially impacting user congregation and discussions, leading to a nearly 40% decline in Reddit's stock this year.
- Increased Competition: The Forum app, launched as part of Facebook Groups, aims to compete with Reddit, with analysts noting that it could gradually erode Reddit's appeal to casual users who have less community loyalty.
- Advertising Growth: Despite competitive pressures, Reddit reported over 60% year-over-year sales growth in April, marking its seventh consecutive quarter of sales growth, indicating strong performance in its online advertising business.
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See More
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- Market Opportunity Analysis: UBS believes that meaningful investment opportunities still exist despite stocks nearing all-time highs, particularly in companies like Broadcom and Accenture, reflecting optimism for future growth.
- Broadcom's Strong Performance: Broadcom's stock has risen 22% this year, with a forecasted cash flow return on investment (CFROI) exceeding 80% by 2027, indicating its leadership in ASIC chips and the importance of AI workloads, suggesting robust future performance.
- Accenture Facing Challenges: Although Accenture's CFROI is projected to reach 43.7%, its stock has fallen 34% this year, reflecting market concerns over margin pressure and disintermediation risks from emerging AI models, leading to subdued investor sentiment.
- Investment Strategy Recommendations: UBS advises investors to focus on companies with improving cash flow returns and high-quality laggards, emphasizing the potential value of these firms in the software and IT consulting sectors, despite their stock prices having declined by over 5%.
See More
RDDT Options Contract Analysis and Investment Opportunities
- Put Option Appeal: The current bid for the $140.00 put option is $47.50, and if an investor sells-to-open this contract, they commit to buying the stock at $140.00, effectively lowering their cost basis to $92.50, which is approximately a 3% discount from the current price of $144.99, making it attractive for those interested in RDDT.
- Return Potential Analysis: Should the put option expire worthless, it would yield a 33.93% return on the cash commitment, or an annualized return of 14.69%, highlighting the potential attractiveness of this investment strategy in the current market environment.
- Call Option Returns: The $185.00 call option has a current bid of $50.50, and if an investor buys RDDT shares at $144.99 and sells this contract, they could achieve a total return of 62.42% if the stock is called away at expiration in September 2028, showcasing the high return potential of call options.
- Risk-Reward Tradeoff: Given that the $185.00 call option represents an approximate 28% premium to the current stock price and has a 35% chance of expiring worthless, investors can retain their shares while also securing an additional 34.83% return, or 15.08% annualized, making this strategy appealing for risk management.
See More
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- Meta's New App Testing: Meta has launched a test app called Forum on iOS, aiming to compete with Reddit; if successful, it could gradually erode Reddit's appeal to casual users, potentially leading to user loss and impacting its market position.
- Analyst Rating Divergence: According to Koyfin data, among 32 analysts at Truist, 21 rate Reddit stock as ‘buy’, 10 as ‘hold’, and 1 as ‘sell’, reflecting mixed market sentiment regarding its future performance.
- Earnings Highlights: Reddit reported $663 million in revenue for Q1 2026, a 69% year-over-year increase, with advertising revenue surging 74% to $625 million, significantly exceeding Wall Street expectations and demonstrating strong growth momentum.
- Market Sentiment Shift: While retail sentiment on Stocktwits remains ‘bullish’, concerns about potential engagement drops due to Meta's new app have intensified, contributing to a 38% decline in Reddit's stock year-to-date.
See More
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- Strong U.S. Market Performance: The S&P 500 rose by 0.4%, the Dow Jones increased by 0.6%, and the Nasdaq gained 0.2%, marking the longest weekly gain streak since 2023, indicating increased investor confidence in risk assets amid hopes for a U.S.-Iran peace deal.
- Active ETF Market: The SPDR S&P 500 ETF and Invesco QQQ Trust both rose by 0.4%, while the Dow Jones Industrial Average ETF increased by 0.7%, reflecting optimistic sentiment towards major indices, particularly ahead of the upcoming three-day weekend.
- Oil Prices Edge Up: International Brent crude futures added 0.9% to close at $103.54 per barrel, while West Texas Intermediate crude rose about 0.3%, reflecting market hopes for a resolution to the Iran conflict, although still below earlier peaks this week.
- New Fed Chair Sworn In: Kevin Warsh was officially sworn in as the 17th Chair of the Federal Reserve, with market expectations regarding his policy direction likely to influence future monetary policy and economic trends, especially in the context of the current economic recovery.
See More
Meta Launches New App Threatening Reddit's User Base
- Meta App Launch: Meta has introduced a standalone app called Forum, currently in testing on Apple's iOS, aimed at competing with Reddit and potentially attracting users with less loyalty to Reddit's community, which could impact user engagement on the platform.
- Stock Price Reaction: Reddit shares fell approximately 6% on Friday, reflecting market concerns about potential user attrition due to Meta's new app, despite Reddit's strengthening online ad business and a nearly 40% decline in stock price this year.
- Analyst Insights: Truist analysts noted that this move by Meta could gradually erode Reddit's utility, particularly for casual users, and recommended investors to keep an eye on Reddit's stock as a potential buy opportunity.
- Historical Context: Meta previously launched a Facebook Groups app over a decade ago but discontinued it in 2017, indicating Meta's ongoing interest in the social discussion space and its efforts to reclaim that market segment.
See More
Meta's Forum App Poses New Threat to Reddit
- Stock Decline: Reddit shares fell approximately 6% on Friday, reflecting market concerns over Meta's new Forum app potentially impacting user congregation and discussions, leading to a nearly 40% decline in Reddit's stock this year.
- Increased Competition: The Forum app, launched as part of Facebook Groups, aims to compete with Reddit, with analysts noting that it could gradually erode Reddit's appeal to casual users who have less community loyalty.
- Advertising Growth: Despite competitive pressures, Reddit reported over 60% year-over-year sales growth in April, marking its seventh consecutive quarter of sales growth, indicating strong performance in its online advertising business.
- Analyst Recommendations: Truist analysts recommend buying Reddit stock, suggesting that even with new competition, Reddit's core user base is likely to remain loyal, while the impact on non-core users could be more significant.
See More
