Reddit beat earnings. Beat them badly. Revenue up. Profit up. Guidance up. The stock dropped eleven percent.
The reason given was "choppy search referrals." Not declining search referrals. Choppy ones. The stock market looked at a company that crushed estimates and decided the quality of its Google traffic wasn't smooth enough. Like a sommelier spitting out a profitable quarter because the bouquet had insufficient notes of algorithmic consistency.
Imagine buying Reddit shares the day before earnings. You read the analyst reports. You build a position. You feel smart. The company reports numbers that exceed every metric Wall Street asked for. You refresh your portfolio and watch eleven percent of your money evaporate because search traffic had the wrong texture.
This is what technical analysts have been screaming about for decades. Earnings don't matter. Revenue doesn't matter. The only thing that matters is whether enough people decide to click the sell button at the same time. Reddit could've reported a f*cking teleportation device in development and the stock would've tanked if someone whispered the word choppy near a Bloomberg terminal.
The retail traders who bought calls are now explaining to their spouses that yes the company did well but the referrals were choppy. Their spouses are nodding. They don't know what choppy means either. Nobody does. It's a word analysts use when they need to justify why a stock moved opposite to logic.
Reddit shares are now cheaper despite the company being demonstrably more profitable than expected, which proves the market prices in everything except whether anything makes sense.
Photo by on Unsplash
Leave a Comment