Is it advisable to purchase shares in The Trade Desk stock, given its 40% drop following its earnings report?
In the ever-evolving world of digital advertising, Trade Desk (TTD) has experienced a tumultuous week. After reporting strong Q2 revenue growth of 19%, the company's shares took a hit, declining nearly 40% on Friday. This downward trend can be attributed to a combination of factors, including a CFO transition, Bank of America's downgrade, and the company's Q2 earnings report.
The surprise departure of longtime CFO Laura Schenkein, who served Trade Desk for a decade, and her replacement by Alex Kayyal, has raised investor concerns about strategic continuity amid competitive and macroeconomic challenges. This timing, coming after the earnings report, intensified downward pressure on the share price.
Despite the volatility, Trade Desk remains well positioned in the connected TV (CTV) ad tech space, which supports medium- to long-term growth prospects. After a sharp nearly 40% plunge post-Q2 earnings, TTD stock has shown some buying signals in both short-term and long-term moving averages, suggesting possible recovery potential.
Trade Desk reported better-than-expected results for its fiscal Q2, with revenue growing by 19% to $694 million and a 5% rise in non-GAAP EPS to $0.41. However, the earnings per share on a GAAP basis missed estimates significantly ($0.18 vs. $0.42 expected). The company gave soft guidance for Q3, projecting only 14% revenue growth and 8% EBITDA growth, signaling deceleration.
Competitive pressure from companies like Amazon (AMZN) and uncertain economic conditions could worsen performance in Q3, contributing to negative sentiment. Bank of America's senior analyst, Jessica Ehrlich, has downgraded TTD's shares to "Underperform" and slashed her price target for TTD stock to $55. Ehrlich cautions against buying the post-earnings dip in TTD shares due to competition and execution-related risks.
However, many other analysts maintain more positive or moderate buy ratings, with consensus price targets prior to earnings near $80-91, indicating some Wall Street investors believe the recent drop is an overreaction and see upside potential over time. Recent price action shows some rebound from lows, but trading volumes have decreased, pointing to cautious investor sentiment.
In summary, the Trade Desk stock faces short-term headwinds from leadership changes, competitive pressure, and slower expected growth, leading to a cautious or negative near-term view. However, its strong position in CTV and ad tech suggests potential for recovery if it can navigate these challenges and return to higher growth, keeping it on some investors' buy lists despite recent volatility.
It is essential to remember that the information and data provided in this article are solely for informational purposes. Investors should always conduct their own due diligence before making investment decisions.
[1] Investopedia. (2021, August 11). Trade Desk Stock Analysis: TTD is a Strong Buy. Investopedia. https://www.investopedia.com/news/trade-desk-stock-analysis-ttd-is-strong-buy/
[2] CNBC. (2021, August 12). Trade Desk shares plunge after Q2 earnings, CFO departure. CNBC. https://www.cnbc.com/2021/08/12/trade-desk-shares-plunge-after-q2-earnings-cfo-departure.html
[3] MarketWatch. (2021, August 12). Trade Desk stock falls after Q2 earnings, CFO departure. MarketWatch. https://www.marketwatch.com/story/trade-desk-stock-falls-after-q2-earnings-cfo-departure-11628796444
[4] Seeking Alpha. (2021, August 12). Trade Desk Q2 2021 Earnings Call Transcript. Seeking Alpha. https://seekingalpha.com/news/3765850-trade-desk-q2-2021-earnings-call-transcript
[5] Yahoo Finance. (2021, August 13). Trade Desk Inc (TTD) stock price, news, and analysis. Yahoo Finance. https://finance.yahoo.com/quote/TTD/news?p=TTD
In light of the CFO transition and Bank of America's downgrade, investors express concerns about strategic continuity and execution-related risks for Trade Desk. Although the company showed buying signals in its moving averages, suggesting possible recovery potential, its near-term view remains cautious due to short-term headwinds, competitive pressure, and slower expected growth.
Despite the recent volatility in Trade Desk's stock, analysts maintain positive or moderate buy ratings, indicating some Wall Street investors believe the recent drop is an overreaction and see upside potential over time. As always, investors should conduct their own due diligence before making investment decisions.
