The Trade Desk: Searching for a Bottom After a Brutal Year

The Trade Desk US88339J1051

The past twelve months have been punishing for shareholders of The Trade Desk. The advertising technology firm’s removal from the Nasdaq-100 index in December punctuated a decline that has erased over two-thirds of the company’s market value. Despite this dramatic share price collapse, the underlying business operations have demonstrated notable resilience.

Recent trading suggests a potential stabilization. After hitting a 52-week low of $30.80 on December 15, the equity has recovered to trade near $38.31. This bounce hints at renewed investor interest, with the critical question being whether the $38 level can establish a durable floor.

The company itself is providing some support. Management has authorized a new $500 million share repurchase program. Furthermore, certain institutional investors, including Brookstone Capital Management, have significantly increased their stakes recently—a vote of confidence in the long-term outlook.

Slowing Growth Drives Valuation Concerns

The steep correction in the stock is rooted in concrete financial developments. For the third quarter, The Trade Desk reported revenue of $739 million, representing an 18% year-over-year increase. While solid, this growth rate disappointed a market accustomed to more robust expansion; gains were 25% in Q1 and 19% in Q2.

Profitability metrics, however, remain strong. The company posted a net profit margin of 16%, and its adjusted EBITDA margin reached 43%. Diluted earnings per share came in at $0.45, slightly ahead of analyst consensus estimates.

Market reaction has been dominated by concerns over global advertising budgets and uncertainty about the pace of business development in a challenging macroeconomic environment, compressing the stock's valuation multiple.

Diverging Views on Wall Street

Analyst sentiment is sharply divided, reflecting the current uncertainty. In mid-December, firms including Jefferies and Wedbush slashed their price targets dramatically to $40, aligning closely with the prevailing trading price. DA Davidson reduced its target from $80 to $54.

In contrast, a cohort of market researchers maintains far more optimistic projections. The average price target sits between $76 and $81, which would imply a theoretical doubling of the share price from current levels. This wide dispersion underscores the lack of clarity regarding the appropriate valuation.

Another notable factor is the short interest. Currently, 12.27% of the free float is sold short, a figure that exceeds the industry average of 7.3%. Should the narrative begin to improve, covering these positions could fuel additional upward momentum.

Strategic Focus on Connected TV

The company’s video segment, and specifically Connected TV (CTV), now accounts for approximately half of total revenue. Management highlights this area as the key strategic growth driver, reporting that its Kokai platform is now utilized by about 85% of its client base.

All eyes are now on the next quarterly earnings report. The figures will reveal whether The Trade Desk can re-accelerate its growth trajectory or if the phase of more moderate expansion is set to continue.