Reddit Inc. RDDT is currently weathering the most significant downturn since its IPO.

Hedgeye Risk Management recently sounded the alarm with a somber report, projecting a drastic 50% plunge in Reddit shares from their current levels.

Redditor EchoInTheHoller raised concerns via a post on r/stocks, shedding light on the stock’s unprecedented decline.

The stock witnessed a sharp drop of up to 15% on March 27, hitting its lowest point since March 22, a stark contrast to the euphoria following Reddit’s IPO just days prior, where it surged by 48%.

Unraveling the Forecast

Hedgeye analyst Andrew Freedman left no room for optimism, labeling the stock as “fundamental short” and “grossly overvalued,” indicating that it should trade much closer to its IPO price of $34, signaling a potential 50% decline from the previous day’s close.

Despite the initial post-IPO surge, Hedgeye’s bearish stance has cast significant doubt on Reddit’s valuation, sparking discussions about the sustainability of its meteoric rise.

With Reddit’s first-quarter 2024 results due in late May, anticipation mounts. While early signs hint at positive momentum, concerns linger about potential vulnerabilities in future financial reports.

The response from Reddit users has been mixed, with some questioning Hedgeye’s credibility due to a lack of transparency in their predictions, while others acknowledge the risks associated with shorting a stock like Reddit, particularly given its low float and potential for a short squeeze.

Looking Forward

As investors grapple with the ensuing volatility, all eyes are on Reddit’s performance in the upcoming quarters. The burning question remains: Can Reddit defy Hedgeye’s grim outlook and restore its upward trajectory?

Benzinga reached out to Reddit for a response, but as of now, there has been no reply.

In the shadow of uncertainties lies the key to Reddit’s future – will it emerge triumphant or succumb to the storm that Hedgeye has predicted?