The Trade Desk (NASDAQ: TTD) saw its stock continue its steep decline, reaching levels not seen since January 2019. The shares have now fallen more than 90% from their all-time high, a dramatic reversal for a company that was one of the best performers in 2024. The sell-off extended into after-hours trading following the release of its latest earnings report.
Earnings miss expectations
The adtech company reported second-quarter revenue of $715 million, up just 3% year-over-year. This marks a significant slowdown from the double-digit growth rates the company has historically delivered. For the first half of the year, revenue rose 7% to $1.4 billion, compared with 22% growth in the same period last year.
Profitability also weakened. Net income margin fell to 9% from 13% a year earlier, with net profit dropping to $64 million. The CEO acknowledged the challenges, stating: "We have a clear understanding of the factors that impacted our performance, and we are taking decisive action to strengthen our execution, upgrade our platform, and sharpen our focus on the areas where we can create the greatest value."
Looking ahead, the company guided third-quarter revenue to $650 million, well below the $804 million analysts had expected. Adjusted EBITDA is projected at around $160 million.
A classic value trap?
With the stock trading at a forward price-to-earnings ratio of 10.25—below the sector median of 12.7 and far below its five-year average of 54—TTD may appear cheap. However, the deteriorating fundamentals suggest the low valuation could be a trap. The consensus analyst target has already been cut to $31.50 from $98 a year ago, and further downgrades are likely following this earnings report.
This situation mirrors other tech stocks that have seen sharp declines despite seemingly attractive valuations. For instance, Kioxia's 56% stock plunge shows that strong earnings don't always prevent a slide. Similarly, Zeta Global's post-earnings dip raises questions about whether pullbacks are buying opportunities.
Technical analysis points lower
The daily chart shows TTD has been in a persistent downtrend, trading below its 50-day and 100-day exponential moving averages. The stock formed a descending triangle pattern, with support at $17, its June and July low. In extended trading, it broke below that level to $13, confirming the bearish pattern. The next potential support is the psychological $10 level.
Given the weak guidance and deteriorating fundamentals, the stock may continue to face pressure. Investors should be cautious, as the company's struggles are not yet fully reflected in its valuation. The broader market has also been volatile, with tech earnings and geopolitical tensions weighing on sentiment.
While some may see the low P/E as an opportunity, the company's declining revenue growth and profitability suggest that the stock could remain under pressure. As with any investment, thorough research and consideration of risks are essential.
This article is for informational purposes only and does not constitute financial advice.
