Shares of the social media company Reddit (RDDT -6.82%) were tumbling this morning ahead of the release of the company’s first-quarter results tomorrow. Investors have cooled on Reddit’s stock as they anticipate the company could have another disappointing quarter.
The stock price is likely also being affected by the fact that the U.S. economy contracted in the first three months of the year, its first quarterly decline since 2022.
Reddit’s stock fell by as much as 11% today and was down by 7.7% as of 11:43 a.m. ET on Wednesday.
Investors are heading for the doors before the Q1 release
The company will release its first-quarter results after the closing bell tomorrow, but many investors aren’t sticking around to see the results. A growing skepticism has surrounded the stock since the beginning of this year, with shares down 31% year to date.
The pessimism began after Reddit reported mixed results for the fourth quarter. Sales rose by 71%, but the company’s growth in global daily active unique users fell short of analysts’ expectations, reaching 101.7 million — below the consensus estimates of 103.1 million.
And Wall Street expects some disappointing first-quarter results as well. The analysts’ consensus earnings estimate is $0.03 for the quarter, which would be a nearly 90% decline from the year-ago quarter.
There’s also general negativity toward tech stocks right now against the backdrop of President Donald Trump’s tariffs and the affect they’re having on the economy. Data released today showed gross domestic product (GDP) fell by 0.3% in the first quarter, the first decline in three years.
Economists had been expecting growth of 0.4%, so the decline is sparking fears that a recession may be around the corner.
Investors will know more tomorrow
Large swings in share prices for many stocks have become commonplace recently, and it’s likely that Reddit investors could react strongly to first-quarter results tomorrow, positively or negatively.
Unfortunately, investors can’t do anything about the broader tech sell-off right now, but it’s good to remember that amid the turmoil, it’s best to focus on how the company is performing and not get caught up in panic buying or selling based on daily market moves.
Investors should pay close attention to what management says about user growth as well as any comments about how the current macroeconomic conditions may affect the company before making decisions on the stock.
Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
