Why is Reddit stock down 6% today?

Reddit Inc stock experienced a 6.0% drop in mid-day trading today, closing at $135.67. The decline was due to investors reducing their exposure before the company's third-quarter earnings report, which is expected to be released after the market close on Thursday, October 29. Management's guidance for revenue growth deceleration added to the uncertainty surrounding the release.

The decline stems from a pattern where Reddit's stock often falls sharply after strong Q2 results, as investors focus on a decline in U.S. daily users and management's acknowledgment of fluctuating search traffic from Google. Analysts have reiterated bullish ratings for Reddit ahead of the earnings report, with price targets ranging from $265 to $275 and projecting a roughly 50% year-over-year revenue growth.

However, the stock remains below its key moving averages, indicating a deep technical weakness. The broader market is also on the rise, with nine of the eleven S&P sectors in the green, and only Communication Services and Meta in the red. A Federal Reserve policy decision looms on the horizon, but markets do not expect a rate hike at this meeting.

Today's decline is a result of a combination of de-risking before earnings, a broken technical trend, and investors' unresolved concerns about Reddit's sustainable U.S. user growth and dependence on Google-driven search traffic.