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Reddit Inc (NYSE: RDDT) is a fairly risky investment now that its trading at double the price at which it IPO-ed, as per a New Street Research analyst.

Reddit stock could tank to $54

Dan Salmon assumed coverage of RDDT this morning with a “neutral” rating. His $54 price objective suggests about a 20% downside from here.

The analyst is dovish on Reddit stock primarily because he expects “volatility through the release of second-quarter earnings and three days after when the lockup expires”.

Salmon’s view is in contrast with Cathie Wood – the founder and chief executive of Ark Invest who recently parked $500 million in the social media company (read more) even though it remained in $91 million loss in 2023.

Sam Altman of OpenAI is also a notable shareholders of Reddit Inc.

Cramer shares view on Reddit shares

Dan Salmon agreed that a potential data-licensing deal with OpenAI could unlock more upside but said “the challenge is sizing the opportunity, gauging progress, and gaining conviction in long-term viability”.

For now, he’s convinced that the potential agreement is already factored into the Reddit stock price.

The New Street Research analyst also talked of the need for $RDDT to broaden its advertisers base in his note to clients on Tuesday. The forum social network brought in about 26% of its revenue in 2023 from its top 10 advertisers only.

On Tuesday, famed investor Jim Cramer attributed the continued rally in Reddit shares to artificial intelligence.

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