Reddit could be in trouble after a strong public market debut, according to New Street Research. The firm initiated coverage of the social media company with a neutral rating on Tuesday and a $54 per share price target. New Street’s forecast implies nearly 10% downside from Monday’s close. The firm is the first on Wall Street to issue a stock rating on Reddit. Reddit went public Thursday after pricing its IPO at $34 per share. The stock popped 48% on its first day of trading. Reddit’s initial public offering was the first major social media company to go public since Pinterest in 2019. According to analyst Dan Salmon, the narrative underpinning the stock will be tied to a potential data licensing deal with OpenAI, growth in daily active users per quarter and advertising metrics — which could stoke volatility. “We expect volatility into the first earnings report (date still TBD, we assume early May) and three days after when the lockup expires,” Salmon said. The analyst noted that Reddit’s ad revenue remains “top heavy,” with the top 10 advertisers on the platform accounting for 26%. “High margin data licensing and direct response advertising will drive operating leverage over the mid and long term,” Salmon said. “Expense growth slowed beginning in 1Q23, owing to operating efficiencies put into place throughout 2023 and Reddit remains focused on improving leverage over the long term.”