Is it wise to invest in The Trade Desk stock following its 40% drop post-earnings? Here's Wall Street's projected next move.
The Trade Desk, a pioneer in the adtech industry, continues to make waves with its unique approach to digital advertising. The company sources ad inventory from streaming platforms such as Netflix, Roku, Walt Disney, and Spotify, as well as data from retailers like Albertsons, Target, and Walmart.
In the second quarter, The Trade Desk's revenue rose by 19% to $694 million, and its non-GAAP net income increased 5% to $0.41 per diluted share. However, the company's management provided weak guidance for the third quarter, with revenue expected to increase by 14% to $717 million, causing The Trade Desk's stock to plunge nearly 40% following the second-quarter report.
The Trade Desk's independence distinguishes it from competitors like Alphabet's Google, Meta Platforms, and Amazon. This independence has allowed the company to become a leader in connected TV (CTV) advertising and a formidable player in retail advertising. The Trade Desk operates the leading independent demand-side platform (DSP) in the adtech industry, using artificial intelligence to help clients manage budgets, customize bids, and dynamically target consumers.
Despite the weak guidance, Wall Street analysts remain divided on The Trade Desk's ability to grow revenue faster than 20% annually. Bank of America analyst Jessica Ehrlich downgraded The Trade Desk's stock to hold and slashed her target price to $55 per share, while MoffettNathanson downgraded the stock to sell for similar reasons, slashing its target price to $45 per share.
Analysts expect The Trade Desk's earnings growth in the upcoming quarters to be moderate to weak, with some disappointment reflected in negative stock price reactions, suggesting an anticipated small or negative profit increase. However, The Trade Desk's CEO Jeff Green remains optimistic, believing the trend of the company taking market share will continue for the foreseeable future.
The current valuation of The Trade Desk is 31 times adjusted earnings, which is high compared to its competitors. However, The Trade Desk has consistently taken market share in digital advertising, and adtech spending is projected to increase at 14% annually through 2030, according to Grand View Research.
The Trade Desk's critical partnerships, formed due to its independence, offer opportunities brands cannot find on other platforms. The company has formed partnerships with streaming platforms like Netflix and Roku, as well as retailers like Target and Walmart. These partnerships allow The Trade Desk to offer unique and innovative advertising solutions to its clients.
In conclusion, The Trade Desk is a leading independent player in the adtech industry, with a strong focus on connected TV and retail advertising. Despite some weakness in the second quarter, the company remains optimistic about its future growth prospects, and analysts expect adtech spending to continue growing in the coming years.
