**Should You Hold Onto RDDT Despite a 39% YTD Decline?**
The digital advertising marketplace is more competitive than ever, and Reddit, with its stock symbol RDDT, finds itself grappling with significant challenges. As of now, **RDDT shares have plummeted by 38.8%** year-to-date (YTD), significantly underperforming the broader Zacks Computer & Technology sector, which has seen only a **2.6% decline**. Surprisingly, the **Zacks Internet – Software industry** has managed to post a **5.4% increase** in the same time period. So, the pressing question is: Is it time to hold on to RDDT, or should you consider other options?
### An Underwhelming Year for RDDT
#### Performance Compared to Peers
In comparison to its closest competitor, **Alphabet (GOOGL)**, which has experienced a **10.5% downturn** YTD, Reddit’s decline stings a little more. Observers point to various macroeconomic challenges—including rising tariffs and decreased consumer spending—that have contributed to this underperformance, particularly in the digital advertising sector.
### Could RDDT’s Expanding Portfolio Inject New Life?
#### The Growth Potential
Despite these alarming figures, there are reasons for cautious optimism. Reddit is actively diversifying its advertising solutions, focusing on enhancing **ad efficiency** and increasing **user engagement**. One glowing statistic reveals that **ad revenues surged by 61% year-over-year**, totaling **$358.6 million** in Q1 2025. Furthermore, RDDT has recently launched **Dynamic Product Ads**, allowing advertisers to deliver personalized and contextually relevant ads, thereby increasing engagement and improving **Return on Ad Spend (ROAS)**.
### Innovative Features at Work
With features like improved machine learning targeting and expanded catalog support, Reddit is strategically positioned to help brands connect with **high-intent shoppers**. The platform’s integration with **Smartly** offers advertisers the ability to manage and optimize campaigns across different channels seamlessly. Enhanced tools introduced in May 2025 allow brands to establish **authentic connections** within Reddit’s diverse community.
### Strengthening Partnerships for Competitive Edge
#### Collaborations That Matter
The company is making strides in expanding its partner network. In April, Reddit bolstered its collaboration with **Integral Ad Science (IAS)**, providing advertisers with enhanced measurement capabilities. IAS’s **Total Media Quality** for Reddit now offers greater transparency and sophisticated reporting, allowing advertisers to engage with **real users** and optimize performance effectively.
### Encouraging Earnings Projections
#### Positive Revenue Estimates
Looking ahead, Reddit anticipates revenues between **$410 million and $430 million** for Q2 2025. The Zacks Consensus Estimate sits at **$426.12 million**, suggesting an impressive **51.55% year-on-year growth**. Furthermore, the consensus for earnings has jumped to **19 cents per share**, reflecting a staggering **72.7% increase** over the past 30 days—indicating a year-on-year growth of **416.67%**.
### Facing Stiff Competition
#### Market Pressures
Despite these optimistic indicators, Reddit is encountering **intense competition** from Alphabet and **Snap (SNAP)**, which are both enhancing their advertising capabilities. For instance, Snap has introduced **Snap School sponsorships**, creating unique opportunities for brands to collaborate with upcoming creators, thereby increasing brand visibility.
Moreover, Snap’s **Snap Pixel**, a new conversion tracking tool, has been gaining traction among advertisers. These advancements from competitors are vital as they continuously challenge Reddit’s market position.
### Assessing RDDT’s Valuation
#### Overvaluation Concerns
At present, Reddit’s stock appears overvalued. A closer look at its **Value Score** reveals a rating of **F**. The trailing 12-month **Price/Sales ratio** is currently at **8.82**, a stark contrast to the broader Zacks Computer & Technology sector, which stands at **6.10**.
### Conclusion: A Cautious Hold on RDDT
The landscape for Reddit presents a mixed bag of potential and pitfalls. While the company benefits from an expanding advertising business and improved user experience, it faces an uphill battle against established competitors. Additionally, ongoing tariff uncertainties and stretched valuations add to the caution.
Currently, Reddit holds a **Zacks Rank #3 (Hold)**, suggesting that investors should consider biding their time before making further investments. For those eager to explore the stock market, you can view **today’s Zacks #1 Rank (Strong Buy) stocks here**.
This analysis highlights the complexities surrounding RDDT. The digital advertising arena remains innovative and volatile—keep your eyes peeled for potential shifts that could influence Reddit’s trajectory.
This article originally published on [Zacks Investment Research](https://www.zacks.com).
