Shares of The Trade Desk (TTD -5.34%) plunged again on Monday, falling as much as 5.8% to lows not seen since Jan. 2019. As of 2:27 p.m. ET, the stock was still down 5.4%.
The catalyst that sent the adtech specialist swooning was the latest Wall Street downgrade.
Image source: The Motley Fool.
Bleak outlook
HSBC analyst Mohammed Khallouf downgraded The Trade Desk to reduce (sell) from hold and slashed his price target to $10 from $20. That suggests the stock could still fall by another 29% from Friday’s closing price.
The analyst cited The Trade Desk’s waning performance, calling its second-quarter results “dismal” and noting the company’s “sizable miss and guidance shock.” He went on to say that the increasingly competitive operating environment wrought by artificial intelligence (AI) is causing a structural shift away from the open internet — the company’s bread and butter.
The Trade Desk’s results from earlier this month bear out the analyst’s take. In the second quarter, the company reported revenue growth of just 3% year over year to $715 million. The anemic growth flowed through to the bottom line, as adjusted earnings per share (EPS) slumped 17% to $0.34. That was well below analysts’ consensus estimates, which called for revenue of $753 million and EPS of $0.18.
Today’s Change
(-5.34%) $-0.76
Current Price
$13.39
Key Data Points
Market Cap
Day’s Range
$13.32 – $13.97
52wk Range
$12.83 – $56.39
Volume
15.5M
Avg Vol
22.7M
Gross Margin
76.87%
I’ve been a shareholder of The Trade Desk for years, so I’m rooting for the company to succeed. That said, management has been working to engineer a turnaround for 18 months now, and its results continue to deteriorate.
The stock is currently selling for less than 16 times earnings, its lowest valuation ever, but the uncertainty facing The Trade Desk and its apparent inability to turn things around make it far too risky for new money. I’m not selling yet, but my patience is beginning to wear thin.
HSBC Holdings is an advertising partner of Motley Fool Money. Danny Vena, CPA has positions in The Trade Desk. The Motley Fool has positions in and recommends The Trade Desk. The Motley Fool recommends HSBC Holdings. The Motley Fool has a disclosure policy.
