The Trade Desk (NASDAQ: TTD) has seen its shares tumble to levels not witnessed since early 2019, yet technical indicators are flashing potential bullish reversal signals. The stock, which peaked at $141, now trades near $13.5, slashing its market capitalization from $63.35 billion to $6.38 billion. Despite ongoing business challenges, chart patterns suggest a possible rebound.
Technical indicators point to a bottom
TTD's price action has formed an island reversal pattern after a sharp gap down following its earnings release. This pattern, often seen as a bullish reversal signal, is accompanied by a bullish divergence in the Relative Strength Index (RSI), which has climbed from 27 to 36, and a bullish crossover in the MACD indicator. These signals suggest that selling pressure may be exhausting, and investors could be accumulating shares.
If the bullish scenario plays out, the stock could rally toward the $20 psychological level. However, a drop below the year-to-date low of $13 would invalidate this outlook.
Weak fundamentals persist
The company's recent quarterly results missed both its own guidance and analyst expectations. Revenue for the quarter rose modestly to $715 million from $694 million a year earlier, while first-half revenue grew 7% to $1.4 billion. This marked the second consecutive quarter of missed estimates, prompting analysts to slash forward projections. Third-quarter revenue is now expected at $650 million, down 12% year-over-year, with a further 18% decline to $693 million in the fourth quarter, bringing full-year revenue down 5.2% to $2.7 billion.
Management is actively seeking a turnaround, having secured partnerships with Dentsu and Databricks, and expanded into the travel sector. These efforts, however, have yet to translate into improved financial performance.
Valuation and buybacks
Despite the struggles, TTD's valuation has become compelling. The forward price-to-earnings ratio stands at 11.6, a sharp drop from its five-year average of 53 and below the sector median of 13.6. This cheap valuation has prompted the company to boost its share repurchase program, buying back $78 million in the second quarter and retaining $269 million for future buybacks.
Investors are now weighing two scenarios: continued downside amid business headwinds, or a technical bounce driven by bullish divergences. The island reversal and RSI/MACD signals offer hope for a near-term recovery, but the fundamental picture remains uncertain.
For context, other tech stocks have shown similar patterns. For instance, Nio's bullish wedge emerged despite EV demand warnings, and Marvell's dip came despite record Q2 results. These examples highlight that technical signals can sometimes precede fundamental turnarounds.
As always, investors should monitor both technical and fundamental developments closely. The coming quarters will be crucial in determining whether TTD can reverse its fortunes.
This article is for informational purposes only and does not constitute financial advice.
