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Reddit (RDDT) came under pressure on Wednesday after data confirmed its CEO Steve Huffman has been unloading the social media stock since early August.
Huffman has sold shares multiple times in recent weeks. Plus, Chief Accounting Officer Michelle Reynolds trimmed her stake in the California-based company by over $700,000 on Aug. 5 as well.
Reddit stock has been strong outperformer in recent months. At the time of writing, it’s up roughly 33% in the year to date.
Why Reddit Stock Closed in the Red Today
These recent insider sales appear to bode poorly for the NYSE-listed company. Investors are viewing the insider selling as a warning of waning confidence in Reddit.
However, investors should note that these transactions were made as part of 105b-1 trading plans, and are traditional for company executives.
Still, such sales can amplify anxious sentiment and can trigger a broader selloff, which is why RDDT stock closed down on Wednesday.
Should You Buy RDDT Shares on the Pullback?
While insiders have been cashing out of Reddit shares this month, Argus Research favors owning them for the longer term given the firm’s “promising” growth runway.
According to its analysts, RDDT is spending aggressively on research and development (R&D), which they believe will drive meaningful growth in average daily users over time.
Additionally, the San Francisco-headquartered firm is strongly positioned to steal share from rivals in the large and fragmented advertising market, they told clients in their latest research note.
A clean balance sheet was among other reasons the investment firm cited for its bullish view on RDDT shares. Argus currently has $250 price target on the social media stock, indicating potential upside of nearly 15% from here.
Wall Street Recommends Caution on Reddit
Investors should note, however, that other Wall Street firms do not share Argus Research’s optimism on Reddit stock.
While the consensus rating on RDDT shares remains at “Moderate Buy,” the mean target of about $190 suggests potential downside of some 12% from current levels.
