“Heading into the IPO, we put RDDT on the short bench, reflecting our belief that the stock is a fundamental short but that the days immediately following the IPO would likely be volatile and not the proper time to make it an active short,” analyst Andrew Freedman wrote.

Reddit did not immediately respond to a Bloomberg News request for comment.

In its first few days of trading, Reddit shares gained more than 90% to an all-time high close of $65.11 on Tuesday. According to Hedgeye, the stock is “grossly overvalued” and should trade closer to its IPO price of $34. That reflects about 50% downside from Tuesday’s close.

“The deal was oversubscribed, the float small, valuation range looked reasonable, and they timed the IPO coincident with easy comparisons where the company is going to post accelerating revenue and user growth the first quarter out of the gate as a public company,” Freedman added.

Still, the warm welcome the public markets gave Reddit shows investor enthusiasm for all things artificial intelligence, which was at the center of the company’s IPO. Reddit’s public offering is the fourth largest on a US exchange in 2024 and a positive signal for technology companies that put their offering plans on hold in recent years.

Read more: Reddit, Galderma Fire IPO Starting Gun. Now Investors Want More

The company is expected to report its first quarter 2024 results at the end of May. Freedman expects that its first report as a public company will show “fundamental momentum,” but sees the possibility for weakness in upcoming reports.

“Our attention is focused on 2H24 and 1H25 where we expect a rapid deceleration in user and revenue growth,” Freedman said.