Reddit (NYSE: RDDT) has the odds stacked against it, according to Bernstein analyst Mark Shmulik, who initiated coverage of the social media company this past week. He assigned the stock an "underperform" rating and attached a price target of $40. Based on the stock price as of this writing, that price target implies potential downside of about 16%.

The analyst's main contention is that the promises Reddit made in the lead-up to its IPO are unlikely to bear out. The company's strategy is to grow its user base, boost engagement with better tools for users, and increase its appeal to advertisers with various improvements to its platform.

Shmulik points out that similar strategies were put in place at other social media companies that have struggled since going public, like Pinterest and . Since peaking during the pandemic, Pinterest stock is down 62%, and Snap stock is down 87%.

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Source Fool.com